Countrywide Financial Corp. Chief Executive Officer Angelo Mozilo, whose mortgage company plans to eliminate as many as 12,000 jobs, said interest rate cuts by the U.S. Federal Reserve won't be enough to revive home sales.
``The issues the economy is facing are worse than most people believe,'' Mozilo said in a Sept. 7 interview. Fannie Mae and Freddie Mac should be allowed to finance bigger home loans, and limits for government mortgage insurance through the Federal Housing Administration should be raised, he said.
The Fed must make more money available for mortgages by lowering its target for overnight loans between banks by at least one percentage point, and by further reducing the discount rate at which it lends to banks, said the 68-year-old Mozilo. The Fed is scheduled to meet Sept. 18 to set rates.
U.S. lawmakers should increase the cap on mortgages that Fannie Mae and Freddie Mac can buy to $650,000 from the current $417,000, Mozilo said. The cap hurts the most expensive markets where almost all mortgages are jumbos, he said. The median sales price for a single-family home in San Jose, California, known for its Silicon Valley technology companies, was $788,000 in the first quarter, according to data compiled by the National Association of Realtors.
Consumers' options for loans are dwindling or getting more costly as investors shun mortgage-backed bonds that aren't backed by the federal agency Ginnie Mae, or by Fannie Mae and Freddie Mac, whose status as government-chartered entities gives their securities an implied U.S. guarantee.
