In a new partnership announced Tuesday, Fannie Mae (FNM) said it will purchase 30- and 15-year fixed rate mortgage loans from the Federal Home Loan Bank of Chicago under an affordable mortgage finance program run by the FHLB branch. FHLB Chicago’s Mortgage Partnership Finance program has been around eleven years, and provides funding to hundreds of member community banks, thrifts and other financial institutions as part of an “affordable mortgage” initiative that seeks to ensure mortgage availability to what FHLB officials termed “working-class families” in a press statement.But MPF loans have never been saleable to the GSEs. Through purchasing the loans, Fannie Mae will provide another source of funding for Mortgage Partnership Finance loans, and in turn, help to bestow more liquidity to the mortgage market. At least, that’s the party line here. “This is an excellent example of how the synergies created by merging OFHEO and FHFB into the new Federal Housing Finance Agency can help to provide greater liquidity and stability in the mortgage markets.” said Federal Housing Finance Agency director James Lockhart in a press statement Tuesday. The FHFA, which regulates both Fannie Mae and Home Loan Banks, approved the partnership and said the agreement will allow Fannie Mae to work with an experienced counterparty while providing an efficient secondary platform for small lenders. “Partnering with the Federal Home Loan Bank of Chicago heps us to fulfull our mission to provide the most support possible to the market, while prudently managing risk,” said Herb Allison, president and CEO, Fannie Mae. “Fannie Mae may find it more efficient to manage one relationship — with the FHLBank of Chicago — than to work with a number of smaller, individual institutions,” Lockhart suggested. “The Federal Home Loan Banks continue to be an integral part of the nation’s housing finance system, playing a vital role in helping to finance homeownership for millions of Americans.” The move clearly indicates how federal officials intend to wield their new-found power over both GSEs in the wake of placing both Fannie and Freddie into conservatorship last month; administration officials indicated at the time they would seek to use both GSEs to stabilize a wobbling U.S. mortgage market. Disclosure: The author held no relevant positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade. Editor’s note: To contact the reporter on this story, email [email protected].