UPDATE 1-US working on affordable mortgage plan-sources

Wed. December 03, 2008; Posted: 06:34 PM

WASHINGTON, Dec 04, 2008 (Reuters via COMTEX) -- FRE | Quote | Chart | News | PowerRating -- The U.S. Treasury Department is developing a plan to try to reduce mortgage rates on home loans to 4.5 percent on a 30-year mortgage by making fresh investments in those assets, sources familiar with the plan said on Wednesday.

The plan would see mortgage finance companies Fannie Mae and Freddie Mac expand their buying of mortgage securities to help drive down borrowing costs, the sources said.

The move would be akin to one taken last week by the Federal Reserve when it promised to buy $600 billion in assets and debt from government-sponsored enterprises like Fannie Mae and Freddie Mac, one source said. The Fed's announcement had an immediate impact on home loan rates which fell sharply.

The Treasury's announcement could come as early as next week, the sources said.

Earlier this year, as part of the U.S. government's bailout package for Fannie Mae and Freddie Mac, but before the approval of the Trouble Asset Relief Program (TARP), the U.S. Treasury said it would buy mortgage backed securities of Fannie and Freddie also.

(Reporting by John Poirier and Rachelle Younglai) Keywords: FINANCIAL MORTGAGES/TREASURY (john.poirier@thomsonreuters.com; +1 202 898 8399; Reuters Messaging: john.poirier.reuters.com@reuters.net)

Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.

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