The U.S. Treasury Department announced Wednesday it was increasing financial aid to troubled mortgage finance giants Fannie Mae and Freddie Mac to help stabilize the housing market.
The Treasury was doing so "to ensure the strength and security of the mortgage market, to help maintain mortgage affordability, and to help keep interest rates low," said Treasury Secretary Timothy Geithner in a statement.
"Using funds already authorized by Congress for this purpose, Treasury is amending the Preferred Stock Purchase Agreements, contractual agreements between the Treasury and the conserved entities designed to ensure that each company maintains a positive net worth, to 200 billion dollars each from their original level of 100 billion dollars each," Geithner said.
In addition, the Treasury will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace, he added.
The secretary said Fannie Mae and Freddie Mac are critical to the functioning of the housing finance system in the United States and "play a key role in making mortgage rates affordable and maintaining the stability and liquidity of our mortgage market."
In 2008, almost three-quarters of new home loans were financed or guaranteed by the two giants, Geithner said.
Fannie Mae and Freddie Mac are government-sponsored enterprises that were created to provide stability in the secondary mortgage market and promote access to mortgage credit throughout the United States.
Last July, Congress granted Treasury new authority to provide financial support to the two companies in order to provide stability to financial markets, support the availability of mortgage finance, and protect taxpayers, according to the statement.