The federal government yesterday doubled its commitment to Fannie Mae and Freddie Mac, promising to reimburse the companies for up to $400 billion in losses on their investments in mortgage loans.
The massive expansion of the government backstop is a response to mounting strains on the two companies, officials said.
It was announced as part of the Obama administration's broad plan to reduce foreclosures, which will further squeeze the companies' revenue by requiring the pair to refinance or modify millions of loans to lower monthly payments.
And it comes as a souring economy is pushing more borrowers to default. Fannie and Freddie estimate they will need up to $65 billion from the original $200 billion backstop to cover their losses on mortgage-related investments in the second half of 2008.
