UPDATE 1-US Treasury to double MBS purchases to $10 billion

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WASHINGTON, Sept 19 (Reuters) - The U.S. Treasury intends to double its planned purchases of mortgage-backed securities to $10 billion this month as part of its broad plan to stabilize markets and deal with problem bank assets.

Treasury spokeswoman Jennifer Zuccarelli said the increase would accompany unspecified increases in MBS purchases by Fannie Mae FNM.N and Freddie Mac FRE.N.

The Treasury has not yet begun purchases in the open market, and may make more MBS purchases in future months, subject to the national debt limit, she said.

The Treasury announced as part of its takeover of Fannie and Freddie on Sept. 7 that it would purchase $5 billion worth of MBS to promote confidence and liquidity in the housing market. Under the takeover, the Treasury set up a mechanism to inject up to $100 billion in capital into each institution if needed.

The two government-controlled housing finance firms would be allowed to increase MBS purchases up to their new portfolio limits of $850 billion each, Zuccarelli said. (Reporting by David Lawder, Editing by Dan Grebler)