Fannie Mae's Mudd says won't tap new credit line

WASHINGTON (Reuters) - The chief executive officer of mortgage finance giant Fannie Mae (FNM.N), Daniel Mudd, said on Thursday the company was unlikely to tap emergency credit measures that have been proposed for it by the U.S. Treasury Department.

In an interview on PBS television's "News Hour," Mudd said increasing a credit line for Fannie Mae and allowing Treasury to buy its stock, if necessary to add capital, would help restore confidence but doubted it would be called upon.

"I think it's very unlikely and I think everyone has described it...as a backstop," Mudd said. "Having that backstop there, I think that this is the right time to think about it and talk about it (but) I don't think we'll need it."

He said the housing market downturn was likely to persist for some time and that home prices will keep declining.

"We think the rest of this year is going to be pretty tough," Mudd said." We expect home prices to decline into next year as well before we see a recovery."

He described market conditions as "tough" and said a return to normal conditions will be slow. "We expect it to bounce around the bottom for a while longer."

(Reporting by Glenn Somerville; Editing by Leslie Adler)