Looser rules for mortgage giants on tap

Fannie Mae and Freddie Mac are expected to get further financial leeway from the government, enabling the mortgage-finance companies to expand their roles in the stricken housing market.

Under a deal with their regulator that could be announced this week, the cash cushion Fannie and Freddie are required to maintain could be reduced, people familiar with the matter said Monday. They spoke on condition of anonymity because the move by the Office of Federal Housing Enterprise Oversight has not yet been finalized.

The companies still would face the difficult task of raising additional funds. Fannie and Freddie, which together hold or guarantee around $4.9 trillion in home-loan debt, have had difficulty lining up buyers for their mortgage-linked securities amid plunging home prices and rising foreclosures.