Feds Move To Give Fannie, Freddie Loan Funds

Washington, DC, March 18, 2008--The federal government moved to free up more money for home loans by reducing the cash cushion required for Fannie Mae and Freddie Mac.

It's part of a plan to inject an additional $200 billion of financing for home loans.

The mandatory cash cushion for the companies-- now nearly $20 billion for the two -- will be reduced by a third. The freed up money will be used to help new home buyers take out loans and to help existing home owners refinance.

The capital requirement for each firm will be reduced from the current 30 percent to 20 percent, and future reductions will be considered by their Washington regulator in the future. Fannie and Freddie will probably use special sales of stock to raise billions of dollars.

It's the third step the government has taken recently to allow Fannie and Freddie to take on larger roles in the mortgage market, even though they are losing money.

The two companies together hold or back around $4.9 trillion in home-loan debt.