Fannie Mae -- reacting to the requests of seller/servicers -- has asked its regulator for permission to increase its on-balance-sheet holdings in order to provide liquidity to the secondary mortgage market, sources have told MortgageWire.At deadline time, representatives of Fannie Mae and the Office of Federal Housing Enterprise Oversight declined to comment. Fannie, which is struggling to get current on its financial reporting, has been operating under portfolio caps since late 2005. The cap is currently set at $720 billion. With Wall Street conduits shutting down or tightening loan standards, conforming lenders that play in the nonprime market cannot sell their loans in the secondary market. (At deadline time, the bank-owned National City Home Equity, a unit of National City, told its loan brokers that it would suspend the taking of new applications, according to sources.) Fannie Mae can be found online at http://www.fanniemae.com.

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