Shares in the two largest US mortgage providers rose dramatically today after a government support announcement.
Fannie Mae shares gained 24.9%, and Freddie Mac shares were up 17.6% at the opening of Wall Street trading following a plunge last week in the face of widening fears about their solvency.
The US Treasury Department last night announced a package of measures aimed to bolster confidence in the country's two biggest mortgage corporations.
Shares in the Federal National Mortgage Association, known as Fannie Mae, and its partner company, Freddie Mac (Federal Home Loan Mortgage Association), had fallen heavily over worries about their financial viability.
US Treasury Secretary Henry Paulson announced the measures last night in a bid to halt one of the gravest threats ever to the US financial system.
The two federal mortgage agencies underpin some $5.3 trillion (€3,334bn) of mortgage debt, or almost half of the US mortgage market.
They convert mortgages sold by banks into bonds, which are underpinned by what is considered the implicit guarantee of the US government.
Concern that some of that debt will never be repaid has driven down the share price of the two institutions by over 70% this year.
Last night's plan authorised Fannie Mae and Freddie Mac to borrow from the Federal Reserve. More support measures are expected to be rushed through the US Congress, possibly later this week.
