There is little scope for a substantial increase in U.S. interest rates during 1987 said Federal National Mortgage Association chairman David Maxwell. Speaking to the New York Financial Writers Association Maxwell said he viewed this weeks rise in U.S. banks prime rates to 7-3/4 pct from 7-1/2 pct as a temporary phenomenon. I dont see a substantial rise in rates this year. If anything the Federal Reserve is more likely to ease than to tighten (monetary policy) because so many sectors of the economy are showing weakness Maxwell said. Fannie Mae buys mortgages from lenders and issues mortgage-backed securities. Maxwell said restructuring of Fannie Mae over the last two years had limited its exposure to interest rate fluctuations. A one pct rise in rates in 1987 would cost shareholders about 18 cts a share versus one dlr a share in 1981 he said. Maxwell also questioned the view that housing crowds out other sectors of the economy from obtaining needed capital. Theres no evidence that housing is crowding firms out of the long-term debt market he said. Both home mortgage debt and long-term corporate debt grew at about equal annual rates of about 13 pct in 1986 -- a year when mortgage originations of 442 billion dlrs needed record housing capital he said.
LITTLE SCOPE FOR U.S. RATE RISE - FANNIE MAE<FNM>