Federal loan rules eased

WASHINGTON — A federal housing regulator on Wednesday made it easier for mortgage giants Fannie Mae and Freddie Mac to absorb problem loans that are dragging down many U.S. homeowners, the latest of several measures designed to stabilize falling home prices.

The Office of Federal Housing Enterprise Oversight announced that it would lower the amount of extra capital that Fannie and Freddie must keep in reserve from 30 to 20 percent. With less in reserve, these two government-sponsored enterprises will have an estimated $200 billion more available immediately to purchase troubled home loans.

"This should help keep some at-risk borrowers in their homes, which will help stabilize the real-estate market," Kieran Quinn, the president of the Mortgage Bankers Association, said in a statement supporting the action.

Despite promises otherwise, mortgage lenders and loan servicers have moved slowly to modify or refinance loans to homeowners who are behind on their payments. One in 20 home loans nationwide is past due, according to the Mortgage Bankers Association.

Wednesday's move by regulators seeks to provide a backstop to lenders. If the stressed loans are modified, Fannie and Freddie now are better able to purchase and bundle them with other home loans to offer to investors as mortgage bonds.

President Bush's treasury secretary, Henry Paulson, was said to have played a role in bringing about the move, as he did in the rescue buyout of investment firm Bear Stearns by rival JPMorgan Chase — which was orchestrated and backed up by the independent Federal Reserve.

"Additional capital will enable the companies to help more homeowners and will strengthen the underlying fundamentals of the mortgage market," Paulson said in a statement.

The news is particularly important to California and other states with high home prices. Fannie and Freddie will be freer to absorb many of the so-called jumbo loans that until recently were too high-priced to be in their portfolios.

"This capacity will permit them to do more in the jumbo temporary conforming market, subprime refinancing and loan modifications areas," the Office of Federal Housing Enterprise Oversight said in a statement.