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Mortgage CEO Wants A Federal Rescue

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By ALAN ZIBEL, The Associated Press

Published: December 4, 2007

WASHINGTON - The CEO of the country's biggest mortgage lender says greater government intervention is needed to rescue the U.S. housing market as his peers warn the worst is yet to come.

The gloomy assessments of the housing market were made Monday at a conference sponsored by the Office of Thrift Supervision, where Treasury Secretary Henry Paulson said an agreement is imminent to temporarily freeze interest rates on thousands of mortgages at risk of default.

Most mortgage industry executives praised the Treasury-led plan.

Daniel Mudd, chief executive of government-backed mortgage finance company Fannie Mae, called it a "positive step," saying that many borrowers will be able to avoid foreclosure if they are given more time. "Largely, the industry is beginning to reconstruct itself," Mudd said.

Yet the outlook of executives attending the conference was bleak.

Kerry Killinger, chief executive of major lender Washington Mutual said problems are starting to show up in loans made to homebuyers with strong credit records because real estate prices continue to slide.

He said he supports the Federal Reserve cutting interest rates as well as temporary expansions of Fannie Mae and Freddie Mac's funding capacity.

"I'd be supportive of whatever it took for the industry to be on stronger footing," Killinger said.

Angelo Mozilo, CEO of Countrywide Financial Corp., said he also supports Fannie and Freddie being allowed to buy bigger home loans and keep more of them on their books as a way to improve liquidity for the battered industry. The Bush administration has opposed such efforts backed by congressional Democrats.

"This is the time for Fannie and Freddie to step up to the plate and take action and try to bring liquidity back to the market," Mozilo said.

However, Democrats and Republicans continue to debate the issue even as Fannie and Freddie's profits plunge and their stock prices crash.

An effective compromise anytime soon is unlikely, said Brian Gardner, a Washington policy analyst with Keefe, Bruyette & Woods.

"There are too many conflicting interests," Gardner said in an interview.

Echoing the complaints of consumer advocates who have long pushed for mortgage lending reform, Robert Toll, chief executive of luxury home builder Toll Bros., said stronger restraints are needed to prevent a recurrence of today's problems.

"We had mortgages available to the alive and standing and that was the only criteria," he said. "There's no reason why we can't set limits."

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