Last week both Fannie Mae and Freddie Mac announced stepped-up efforts to aid subprime borrowers who need to refinance into more affordable mortgages, as their representatives testified before Congress. Market participants expected that the effect of such initiatives on loan supply might curb HEL spread widening despite certain program criteria remaining hazy.

Freddie Mac said it plans to buy as many as $20 billion in subprime loans as part of a new initiative. Richard Syron, chief executive of the second-largest U.S. mortgage buyer, said the program, expected to begin in July, would last between two and five years. Fannie Mae, meanwhile, estimated that 1.5 million borrowers facing what it calls "payment shocks" may be eligible for loans it would buy under a new program designed to aid subprime borrowers. The dollar amount of such loans over the next several years was estimated in the "tens of billions" of dollars.

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