August 14, 2008 / 1:51 PM / 11 years ago

Agency MBS may include 10 pct of high-balance loans-SIFMA

NEW YORK, Aug 14 (Reuters) - Fannie Mae and Freddie Mac, the largest providers of funding for U.S. housing, may now include larger loans in up to 10 percent of their bonds that trade in the $4.5 trillion mortgage-backed securities market, an industry group said on Thursday.

The decision by the Securities Industry and Financial Markets Association follows U.S. legislation that permanently boosts limits on loans eligible for Fannie Mae and Freddie Mac programs to $625,550 from the base of $417,000.

Fannie Mae FNM.N and Freddie Mac FRE.N package the loans into securities for sale to investors in the so-called “to-be-announced” market that is the first stage in the life of a guaranteed MBS. SIFMA’s decision follows a controversial debate over whether to allow the loans in the TBA market, whose efficiency affects the cost of mortgages.

“We expect higher balance borrowers to receive both rate relief and increased liquidity as was desired in the legislation, while retaining the overall liquidity of the TBA market,” Sean Davy, a managing director at SIFMA in New York, said in a statement.

Reporting by Al Yoon, Editing by Chizu Nomiyama

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