US regulator to allow two mortgage finance firms to buy more

WASHINGTON, Feb 27, 2008 (AFP) – A US regulator on Wednesday said it would lift mortgage portfolio limits on two government-backed companies, raising the prospects of increased capital for the distressed housing market. Shares in Fannie Mae and Freddie Mac rallied after the government removed the size restrictions on their portfolios, but subsequently lost steam. Fannie Mae closed 1.11 percent higher at 27.27 dollars and Freddie Mac lost 0.48 percent at 25.09.

The Office of Federal Housing Enterprise Oversight (OFHEO) said it plans to remove the portfolio growth caps for Fannie Mae and Freddie Mac on Saturday, following the firms’ cleanup of sloppy financial accounting.

The caps were imposed in 2006 after the two housing government-sponsored enterprises (GSEs), which provide liquidity to the mortgage market that benefits millions of homeowners, failed to provide timely, audited financial statements.

OFHEO, the Department of Housing and Urban Development’s independent financial watchdog, noted that Fannie Mae had published its audited financial statement for 2007 Wednesday and Freddie Mac’s statement was due Thursday.

“These steps constitute an important milestone in remediation of their respective oper

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