WASHINGTON, D.C. - A convoluted and sluggish plan to boost investment in the mortgage market is too little and too slow, U.S. Rep. Randy Neugebauer (R-TX) and U.S. Rep. Melissa Bean (D-IL) said Wednesday in response to a plan by an independent regulator to loosen restrictions on mortgage investor Fannie Mae.

With regulators and Bush Administration officials moving too slowly, Neugebauer and Bean said they plan to introduce bipartisan legislation soon to help homeowners by temporarily lifting portfolio caps.

“It’s time to take a meaningful step to inject liquidity into the mortgage markets. While the Office of Federal Housing Enterprise Oversight has responded to our request in part, we must continue to pursue a more significant policy approach to address this problem,” Neugebauer stated.

“While I’m encouraged by movement from the Administration in response to our bipartisan concerns about the dangerous state of the mortgage market, faster and more decisive action is needed to stem the tide of foreclosures facing Americans today,” Bean added. “If we are going to do this, let’s do it right.”

A day after Neugebauer and Bean sent a letter to Treasury Secretary Henry Paulson expressing concern about restrictions on government-sponsored enterprises (GSEs), the Office of Federal Housing Enterprise Oversight (OFHEO) announced Wednesday a limited plan to lift those restrictions.

Neugebauer and Bean asked Secretary Paulson to support an increase in Fannie Mae’s and Freddie Mac’s investment portfolio cap. GSEs like Fannie Mae and Freddie Mac were chartered to help more people get access to home loans by investing in the secondary mortgage market, but OFHEO had prevented the enterprises from increasing their investment in the mortgage market.
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By investing more in the secondary mortgage market, Fannie Mae and Freddie Mac would provide more capital for mortgage companies to help troubled homeowners refinance.

Last month, Fannie Mae requested to be allowed to grow its portfolio 10 percent to address the growing liquidity problem in the mortgage markets.  But after the Bush Administration announced opposition to an increase, OFHEO held the cap steady.

Today’s announcement by OFHEO addresses this problem, yet it only calls for a two percent increase over a year.

Both Neugebauer and Bean plan to participate in Thursday’s hearing on the issue in the House Financial Services Committee.  Both Secretary Paulson and Federal Reserve Chairman Ben Bernanke are expected to testify.

“Hopefully our legislation will be one facet in a comprehensive approach by Congress to address the growing liquidity problem in our mortgage markets,” Neugebauer and Bean concluded.