February 27th, 2008 9:29 AM

Breaking News:

The Office of Federal Housing Enterprise Oversight (OFHEO) this morning raised the caps on Fannie Mae and Freddie Mac. This takes the reigns off somewhat and will allow the GSE's to provide significant liquidity to the mortgage markets. This could be part of the grease that is needed in order to open up the "jumbo light" or high cost conforming market.

Bernanke is speaking this morning and addressed his opinion on what impact the economic stimulus package will have on the mortgage market. He mentioned that the ruling to package these "jumbo light" mortgages in separate instruments may lessen the impact of the new limits. He did note, however, that Fannie and Freddie have both welcomed the new limits and are committed to providing relief to the jumbo market. So, it could still be a bumpy road but there are a lot of people trying to make this package matter.

This announcement could lead to a volatile day in the bond markets.

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