WASHINGTON (AP) - The Federal Home Loan Bank system can increase purchases
of Fannie Mae and Freddie Mac securities by $100 billion over two years in the
latest government effort to stabilize the devastated market for mortgage-backed
assets.
The 12 regional banks in the system can up purchases of securities issued by
the two government-sponsored companies to 600 percent of capital from 300
percent, the Federal Housing Finance Board, which oversees the banks, said
Monday.
The aim is to inject liquidity into a market that has seized up amid a
global credit crunch sparked by the U.S. housing market downturn.
The move "to enable the Federal Home Loan Banks to assist temporarily in
this period of stress, consistent with safe and sound operations, will bring
more liquidity to the mortgage market," Treasury Secretary Henry Paulson said in
a statement.
Created by Congress during the Depression, the self-funded home loan bank
system has some 8,100 members around the country: banks, savings and loans, and
credit unions. Eight of every 10 U.S. financial institutions belongs to the home
loan bank system.
Meanwhile, Fannie Mae reported Monday that its serious delinquency rate for
home loans jumped .08 percent in January to 1.06 percent of the $2.9 trillion in
mortgages it holds.
Mortgages are deemed seriously delinquent when the borrower has missed three
or more consecutive monthly payments or the loan has been referred for
foreclosure.
Last week, the government relaxed capital requirements for Fannie and
Freddie as part of a plan to inject an additional $200 billion for financing
home loans. The initiative requires the two companies to raise substantial
funds, likely through special stock sales.
It was the third step the government has taken in recent weeks to allow
Fannie and Freddie to shoulder larger burdens in the mortgage market despite
their multibillion-dollar losses last quarter and expectations of further red
ink this year.
Fannie Mae shares fell $3.14, or 9.2 percent, to close at $31.16 Monday
while Freddie shares fell $1.97, or 6.1 percent, to $30.61.
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