Fannie, Freddie to Step Up Purchases of Troubled Mortgage Bonds

Bloomberg (10/13/08); Kopecki, Dawn
Insiders say Fannie Mae and Freddie Mac will begin buying $40 billion a month in underperforming mortgage bonds, including subprime, Alt-A and non-performing prime mortgage securities. The purchases are not tied to the U.S. Treasury's $700 billion Trouble Asset Relief Program. The mortgage finance companies have not turned a profit this year and already hold up to $210 billion of bad debt, but the Federal Housing Finance Agency says the Treasury might be able to purchase some of that debt. "The overall goal of the program will be to contribute greater stability and liquidity in the mortgage market, which should enhance consumers' access to mortgage financing and ultimately result in reduced mortgage interest rates," FHFA Director James Lockhart said in a statement in September.