Fannie Mae and Freddie Mac became the latest enlistees in the housing war Wednesday, when new regulations gave them an opening to pump up to $200 billion of liquidity into the beleaguered mortgage market.

The two government-sponsored entities agreed to buy more mortgages after their regulator reduced the amount of capital they must hold to insulate themselves from losses. It was a big move welcomed by some but greeted with skepticism by others, because the housing problems and credit crunch run so deep.

Wall Street embraced the news, with shares of Fannie rising $2.49, to $30.71, and Freddie up $3.88 to $29.90.

Kieran P. Quinn, chairman of the Mortgage Bankers Association in Washington, said the injection of liquidity re-establishes the pipeline of funds that "will enhance lenders' ability to offer financing to a wide variety of borrowers."

But critics said the promise of liquidity is tempered by higher fees placed on mortgages by Fannie and Freddie and by bond-market investors' continued mistrust of mortgage-backed securities, seen by many as the linchpin of the housing meltdown.

"I suppose it's a good idea and worth a try, but I don't think it gets at the problem, which is shrinking financial markets," said Jim Bianco, president of Bianco Research in Chicago and a longtime critic of Fannie and Freddie.

The change is a reduction by the Office of Federal Housing Enterprise Oversight in the surplus-capital reserve for Fannie and Freddie to 20 percent from 30 percent, a requirement put in place several years ago after accounting errors in excess of $11 billion were discovered. Fannie and Freddie on Wednesday agreed to raise "significant" new capital, likely through the issuance of stock.

Combined with the March 1 lifting of the caps on loans the two can hold in their portfolios, the new limits should allow Fannie and Freddie to buy or guarantee $2 trillion in mortgages this year, OFHEO announced.

Some see this loosening the lending logjam, where credit requirements have tightened as more borrowers need relief from unmanageable mortgage payments.

"Anything at this point is good news," said Marve Stockert, executive director of the Illinois Association of Mortgage Professionals, based in Lombard. But Stockert said a bigger obstacle to reviving housing is getting the secondary mortgage market back on its feet. If investors don't want to buy pools of mortgages, banks won't make the loans because they need to sell the loans, not hold them.

"People in the mortgage-backed area aren't feeling comfortable that the risk is gone," Stockert said. "All those countries [that have invested in mortgage-backed securities] are saying it doesn't look so good over here right now, and we're not going to jump in and buy."

And risk there is, Bianco said. "There is an implied [government] guarantee," he said. "Fannie and Freddie have had a long and illustrious history of screwing up. They were required to hold more than a minimum [in reserve] because they couldn't be trusted."

Richard Bira, office manager of First Capital Mortgage in Chicago, pointed to new restrictions, increased down-payment demands and higher fees imposed by Fannie and Freddie as other obstacles.

For example, Fannie and Freddie have rolled out risk-based pricing premiums that raise interest rates on loans they will buy, based on the borrowers' credit scores. For example, Bira said, for credit scores ranging from 620 to 719 on an 850-point scale, Freddie and Fannie will raise rates 0.25 to 0.875 point.

"So, if you have a 625 score and you want to buy a house with 30 percent down, your rate on a 30-year fixed rate loan would be 7.125 instead of 6.25 percent," he said.

"A lot of people are slow to understand that interest rates are almost of secondary importance right now," Bianco said. "Though conforming mortgage rates are about the same as last year, there's a big difference. Last year, if you had a FICO score of 720 or lower, you didn't need 20 percent down -- and 720 is about the national average.

"Basically, you have shut out half the country from getting a mortgage" without a big down payment, he said.

Wednesday's announcement joins a parade of government-generated initiatives to help borrowers buy houses or refinance loans.

mumberger@tribune.com

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Where to get help

- The U.S. Department of Housing and Urban Development certifies local agencies that offer foreclosure counseling. Visit hud.gov, or call 800-569-4287.

- The Illinois Statewide Foreclosure Prevention Network offers counseling over the phone and through non-profit agencies. Call 888-995-HOPE.

- The Illinois Housing Development Authority has several Outreach Days in April. In addition to seminars on avoiding foreclosure, representatives of lenders, housing-assistance groups and state agencies will meet one on one with struggling homeowners. For details, visit ihda.org or call 312-836-5200.