Fannie Mae and Freddie Mac, the US government-sponsored mortgage financiers, were given a green light to expand their loan portfolios on Wednesday amid mounting evidence that the US housing slump is deepening.

The move by the companies’ regulator came after Fannie reported a $3.6bn fourth-quarter loss and triggered wild swings in US financial markets as investors debated whether Fannie and Freddie were in a strong enough position to help the housing sector significantly.