Prometheus 6

In recent months, Fannie Mae and Freddie Mac's role in underpinning the housing market has grown as other financial institutions have fled the credit markets. The companies, chartered by the federal government to keep funds flowing to mortgage lenders, pool mortgages into securities for sale to investors. Fannie Mae and Freddie Mac pledge they will cover the payments if borrowers default, and they also buy and hold their own mortgage investments.

Together, they bought about two-thirds of the single-family-home mortgages that originated from January to March of this year, according to their regulator, the Office Federal Housing Enterprise Oversight. ...

But the companies face questions from investors about whether they have enough capital to cover their obligations, and a loss of faith in them could make it impossible to raise more money.

U.S. Weighs Rescue of Mortgage Giants
After Allaying Anxiety About Fannie and Freddie, Officials Stop Short of Action
By Jeffrey H. Birnbaum and Neil Irwin
Washington Post Staff Writers
Saturday, July 12, 2008; A01

Senior government officials prepared emergency steps yesterday to rescue troubled mortgage giants Fannie Mae and Freddie Mac but stopped short after a campaign of public statements eased immediate concerns about the stability of the institutions.

But federal regulators were forced yesterday to seize California-based IndyMac Bancorp after a run by depositors led to the second-largest failure ever of a U.S. financial institution. The bank, which was taken over by the Federal Deposit Insurance Corp., became the first major bank to shutter its doors since the savings and loan crisis of the early 1990s. One of the country's largest home lenders, IndyMac saw its holdings battered by the downturn in the housing market.