Melvin L. Watt, the new director of the Federal Housing Finance Agency, has announced a significant shift in strategy for Fannie Mae and Freddie Mac which will preserve their role in mortgage financing rather than roll it back. Under Watt's policy, Fannie and Freddie will keep the current limits on the size of loans they guarantee rather than reducing them as previously proposed. The director also loosened rules obligating banks to “buy back” distressed loans. The mortgage financiers will now allow two delinquent payments in the first 36 months after their acquisition of a loan and eliminate automatic repurchases when a loan’s primary mortgage insurance is rescinded.