Fannie Mae and Freddie Mac will be able to buy more mortgages after the amount of capital they're required to hold as a cushion was cut from 30% to 20% today, the Wall Street Journal reports. The move by the Bush administration should pump up to $200 billion of liquidity into the mortgage-backed securities market.
"We believe they can play an even more positive role in providing the stability and liquidity the markets need right now," the director of the Office of Federal Housing Enterprise Oversight tells the Journal. Still, he says the firms will keep "prudent cushions" above this requirement. Fannie Mae and Freddie Mac were chartered by Congress and are chief providers of funding for home loans.