The Treasury Department started purchasing agency MBS in September and Fannie Mae and Freddie Mac will be increasing their MBS purchases to support the housing market, according to Treasury secretary Henry Paulson.

"As Treasury and the GSEs increase their purchases, mortgage affordability should improve for Americans," Paulson said. When the government sponsored enterprise regulator, the Federal Housing Finance Agency, placed Fannie and Freddie into conservatorships on Sept. 7, the Treasury announced that it would purchase $5 billion in GSE MBS and later increased its MBS program to $10 billion.

At the same time, FHFA director James Lockhart said he would relax GSE portfolio limits so they could increase their MBS investments. Paulson said Fannie and Freddie combined have the regulatory "headroom" to purchase over $150 billion in MBS.

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