US Home Loan Banks to Win More Mortgage Holdings-Sources

WASHINGTON (Reuters) - The U.S. Federal Home Loan Bank system will be permitted to expand mortgage bond holdings to around $300 billion under a plan that could be endorsed by its regulator this week, sources familiar with the proposal said.

The Federal Housing Finance Board is likely to hold a meeting this week to vote on the measure and it has broad support among members of an oversight board, said a source familiar with thinking at the regulator.

Because the Home Loan Banks are very risk-averse, they are likely to expand investments in relatively safe mortgage bonds from Fannie Mae (FNM.N) and Freddie Mac (FRE.N).

The Federal Home Loan banks are government-sponsored enterprises that use private capital to finance U.S. housing and community development. The regional banks are held cooperatively by more than 8,000 lending institutions and enjoy a favored position in the capital markets because of their implied government backing.

(Reporting by Patrick Rucker, Editing by Chizu Nomiyama)