NEW YORK (CNNMoney.com) -- The federal regulator of Fannie Mae and Freddie Mac will set new rules early next week governing the mortgage finance companies' portfolios, which play a crucial role in the nation's housing market.
The Federal Housing Finance Agency is required by Congress to issue regulations ensuring the companies' portfolios are backed by sufficient capital, while keeping in mind their ability to provide funding for the mortgage market by turning home loans into securities. Their portfolios contain mortgages and securities backed by home loans.
Fannie and Freddie are the largest sources of funding for the U.S. housing market. They buy mortgages from lenders and either hold them on their books or bundle them into securities. The companies also buy mortgage-backed securities.
But as the mortgage crisis unfolded over the past two years, the federal government has leaned more heavily on Fannie and Freddie to keep the housing market afloat. With investors shying away from buying mortgage-backed securities, the two companies are essentially the only players in the arena nowadays. Regulators lifted the portfolio caps last March.
Conventional Loan 