The nation’s Federal Home Loan Banks will be allowed to double their purchases of mortgage-backed securities backed by Fannie Mae and Freddie Mac, providing more than $100 billion in additional liquidity over the next two years, regulators said today.
The move, approved by the board of directors of the Federal Housing Finance Board, boosts the amount the 12 regional Federal Home Loan Banks can invest in mortgage-backed securities (MBS) from 300 percent of capital to 600 percent for two years.
The move follows on the heels of last week’s decision by the Office of Federal Housing Enterprise Oversight, the regulator of mortgage financers Fannie Mae and Freddie Mac, to relax the government-chartered companies’ capital requirements to allow them to buy up to $200 billion in additional mortgages and MBS (see Inman News story).
In its own attempts to ease the credit crunch, the Federal Reserve has made drastic cuts in short-term interest rates and created new short-term lending programs in which MBS is accepted as collateral (see story).
Fed officials denied a report over the weekend that they were in discussions with the Bank of England and European Central Bank to make coordinated, direct purchases of MBS. A story in the Financial Times that relied on unnamed sources said the Fed was open to the idea as a last resort, but a senior Fed official said no such discussions have taken place, Reuters reports.
Editor’s note: this story was edited after it was originally published to remove an erroneous reference to the Federal Home Loan Banks’ member institutions.
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