Fannie and Freddie overseer won’t slice loan limits


FORTUNE — Fannie Mae (FNMA) and Freddie Mac (FMCC) won’t face limits on the size of home loans that they guarantee, federal regulators said Tuesday, signaling a shift away from the stricter limits that many were expecting.

“This decision is motivated by concerns about how such a reduction could adversely impact the health of the current housing-finance market,” said Federal Housing Finance Agency Director Melvin Watt in a speech this morning at The Brookings Institution.

Investors reacted kindly to the news: Both stocks were up in intraday trading. Freddie gained 6.4% to $4.47 and Fannie increased 7% to $4.54 as of 12:43 p.m. on Tuesday.

Watt, who in January stepped in to head the agency overseeing the mortgage giants, announced a series of steps that will help increase lending and boost recovery of the fragile housing market. He also announced a neighborhood stabilization initiative that will start in Detroit and provide loan modifications to lower-income borrowers as well as the development of a new common securitization platform that would help make more credit available to potential homeowners.

Watt has taken a different tack than his predecessor and opted for policies that boost access to credit rather than wind down the government’s involvement in the mortgage business. Fannie and Freddie back about 60% of all U.S. home loans, and any federal regulations on items such as loan limits or fees can directly impact large numbers of homeowners.

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