New York (HedgeCo.Net) – Mortgage lenders Fannie Mae and Freddie Mac may get some help from the Fed in hopes of staving off a market implosion following a crippling credit crunch and a period of great stress in the financial markets.<\/p>\n
"Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owner companies," Treasury Secretary Hank Paulson said.<\/p>\n
The Federal Reserve of New York has been authorized to provide funding should it prove necessary, in which case the loans will be dispersed with a 2.25 percent interest rate. Meanwhile, the U.S. Treasury is seeking to expand their credit line and make an equity investment if approved by Congress. The Treasury is currently allowed to extend $2.25 billion to each company.<\/p>\n
"This affirmation of the important role [of both companies] – and that we should continue to operate as shareholder-owned companies – should go a long way toward reassuring world markets," said Freddie Mac head Richard Syron.<\/p>\n
The two companies back about $5.3 trillion in mortgages, about half of the total mortgage debt in the U.S. Freddie Mac is scheduled to sell about $3 billion in short-term notes today.<\/p>\n
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Shares of Fannie Mae and Freddie Mac plummeted last week amidst investor scares, but saw a sharp rise before the bell today. Fannie shares rose 22 percent to $12.50 while Freddie shares climbed 27.1 percent to $9.85.<\/p>\n
Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net<\/p>\n
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