WASHINGTON — As the Federal Reserve Board moves ahead with plans to end its purchases of debt and mortgage-backed securities from Fannie Mae and Freddie Mac, their regulator expressed confidence Thursday that private investors would fill the void.

The Fed's purchases have been credited with keeping mortgage rates low and stabilizing housing markets. By the end of March, the Fed plans to have purchased $1.25 trillion worth of MBS and $175 billion of debt.

Though the Fed has warned for months that its purchases will end in March, concern has persisted that private investors would be reluctant to work with the government-sponsored enterprises on a large scale. If investors stay on the sidelines, mortgage rates would likely increase.

"I do believe that private investors, whether domestic or international, will be stepping in," Edward DeMarco, the acting director of the Federal Housing Finance Agency said at a forum sponsored by Women in Housing and Finance. "March is coming soon and the Federal Reserve has been very credible about being very transparent to the marketplace about its buying targets and its intentions about timing. This has allowed the marketplace the opportunity to prepare."

Investors will likely watch the Fed to see what it does with its MBS holdings before fully assuming the central bank's role. They will want to be sure that the Fed will not sell large chunks of its securities, which would effectively dilute investors.

In congressional testimony last week, Fed Chairman Ben Bernanke reassured markets that any securities sales would be gradual.

The Fed would begin selling the MBS "when the economic recovery is sufficiently advanced," Bernanke said. Any sales "would be at a gradual pace, would be clearly communicated to market participants and would entail appropriate consideration of economic conditions."

Fannie and Freddie have operated under a government conservatorship since September 2008 and DeMarco said policymakers need to consider how the GSEs should be resolved.

"The current solution that has the enterprises operating in conservatorship cannot be a long-term solution," DeMarco said. "The administration and Congress have difficult and important decisions to make in the coming months on the future structure of the housing finance system."

The Obama administration dedicated just one sentence to the fate of Fannie and Freddie in the budget proposal it released earlier this month. But the House Financial Services Committee is scheduled to hold a hearing on their future on March 2.

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