The government on Wednesday relaxed capital requirements at Fannie Mae and Freddie Mac as part of a plan to quickly inject an additional...
The government on Wednesday relaxed capital requirements at Fannie Mae and Freddie Mac as part of a plan to quickly inject an additional $200 billion of financing for home loans.
The initiative, which will require Fannie and Freddie to raise substantial funds, is part of a broader government strategy to ease a credit crisis that has made it difficult for consumers and businesses to borrow, and spread fear throughout global financial markets.
The Office of Federal Housing Enterprise Oversight, which oversees the government-sponsored companies, said the mandatory cash cushion for Fannie and Freddie — now nearly $20 billion for the two — will be reduced by a third under the new plan. The goal is to free money to help new homebuyers take out loans and to help existing homeowners refinance into more affordable mortgages.
The capital requirement for each company will be reduced from 30 to 20 percent, and further reductions will be considered by the regulator in the future. Fannie and Freddie will likely raise billions of dollars through special sales of stock.
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