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If explanation failures had not been revealed at Fannie Mae and Freddie Mac, the living accommodations souk could have visaged a soon-to-be monetary disaster, said the new cranium of the blunder of the two mortgage giants on Monday.

James B. Lockhart told the Associated Press on Monday that the companies appear to have the concept that melioration is critical. Yet, he says it will appropriate eld to revamp the interior problems inwardly Fannie and Freddie.

"The structure bazaar is so central in this country," Lockhart said. "And to have it built on what reversed out to be a wonky keystone could have caused imperative pecuniary snags."

Lockhart has headed the Office of Federal Oversight for two months.

He says that destruction was averted because regulators identified and ordered department of local government at Fannie Mae and Freddie Mac. Together, the companies put up with down 40% of the home-mortgage activity - an $8 cardinal commercial enterprise.

"The right information is that it was caught in time and the remedies are protrusive to be in place, so that in that was no crucial breakdown for the norm American," Lockhart said.

Lockhart sides next to the White House and umteen lawmakers once it comes to the two agencies. He believes that the mortgage holdings of Fannie and Freddie, which at the moment unqualified more than $1 trillion, should be shrivelled. He points to legislation in the Senate as "a greatly well behaved protrusive barb."

Fannie Mae is the second-largest U.S. financial institution, after Citigroup, Inc. It is the second-biggest U.S. borrower, after the national parliament. It is at the moment restating its net profit aft to 2001. The correction is foretold to make at smallest possible $11 a billion.

In May, Fannie was penalised virtually $400 cardinal in a resolution with the OFHEO and the Securities and Exchange Commissions. It has secure a top-to-bottom alteration in firm culture, explanation procedures and danger social control procedures.

Fannie rival, Freddie Mac, had an account crisis in 2003, once it was disclosed that net profit had been misstated by in the region of $5 a billion for 2002-2003. It was penalized $125 a million by OFHEO and successive to be paid grave changes.

In the proceeding of any establishment active under, in attendance would be less cash for consumers to get for security interest purposes. Interest rates on marital loans would go even higher, and standards for support would belike duplication.

Created in the 70's by Congress, the companies buy mortgages from sir joseph banks and lenders and afterwards bunch the loans into securities, which are oversubscribed world-wide.