U.S. Treasury Secretary Henry Paulson announced that both Fannie Mae and Freddie Mac will increase their purchases of MBS to “carry out their mission to support the mortgage market."

This move is in addition to what market participants are calling TARP (Troubled Asset Relief Program) that would purchase “hundreds of billions” of dollars in troubled assets on bank balance sheets.

Paulson also said that the Treasury will expand the MBS purchase program announced earlier this month to complement the capital provided by the GSEs and “help facilitate mortgage availability and affordability.”


More details are expected to emerge in the coming days on what the overall impact of the government sponsored plan will look like but market participants expect the impact to be positive for the credit markets.


In response to these announcements, John Courson, chief operating officer of the Mortgage Bankers Association, issued the following statement commending the steps taken by the Treasury.

"The moves Secretary Paulson announced today to increase GSE and Treasury purchases of mortgage-backed securities should provide support for mortgage rates," Courson said in a statement. "The fear was that the illiquidity in the financial markets we have seen this week would have reversed the recent drops in mortgage rates…It is another step in the long-term process of restoring a balance between the supply and demand for housing in a number of markets and thus addressing the continuing problem of mortgage delinquencies and foreclosures.”

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