U.S. Government to Assist Mortgage Finance Giants Freddie Mac and Fannie Mae

The U.S. Treasury Department and the Federal Reserve have outlined a plan that would expand the line of credit for mortgage finance giants Freddie Mac and Fannie Mae in an attempt to alleviate fears that the two companies are on the brink of failure.

Both companies have been hit hard by the current housing crisis in the U.S. as they guarantee nearly half of all U.S. home loans. With the increased number of homeowners defaulting on their loans the two companies have found themselves having to pay out massive amounts of money to cover the mortgages.

Just last week shares in the companies fell close to 50 percent as investors feared there would be difficulty in raising money.

On Sunday the U.S. government tried to ease those fears by guaranteeing an expanded line of credit that would keep the two companies afloat. Treasury Secretary Henry Paulson addressed the significant role that the two companies play and stressed the importance of protecting them during the housing slump, “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.”

In addition, the Federal Reserve announced they would be extending a line of credit to the Freddie Mac and Fannie Mae if the funds were needed.

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