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WASHINGTON, DC-The US Treasury’s decision to provided open-endedfinancial support to Fannie Mae and Freddie Mac may have otherconsequences besides just soothing the ever-jumpy mortgage markets.According to a new report by Credit Suisse Group, the expanded capitalbackstops and portfolio limits announced on Christmas Eve could alsoincrease the prospect of large-scale purchases by the companies ofdelinquent mortgages out of the securities they guarantee.

Last week the Obama Administration announced that Fannie Mae andFreddie Mac will receive unlimited financial assistance – beyond the $400 billion cap on emergency aid that was previously established. Thus far, the two companies have received $111 billion in federalassistance, well short of the $400 billion cap. In a statement, theTreasury Department has said the open-ended commitment is to assuremarkets of the government’s support.

By removing the portfolio cap and increasing debt-investor confidence,Treasury has increased the prospect of large-scale voluntary buyouts,the Credit Suisse report concluded. Credit Suisse did not return acall to GlobeSt.com in time for publication.

A spike in companies’ buyout of loans from their securities has beenpredicted by several industry analysts, according to a Bloomberg newsreport,which cites the requirement of debt contracts to purchase more loansas more mortgages are modified under the Home Affordable program, aswell as accounting rule changes. Fannie’s and Freddie’s new capitalbackstop is expected to accelerate this trend.

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