(Bloomberg) -- Fannie Mae and Freddie Mac surged after their regulator announced that the mortgage giants will be able to back loans worth nearly $1 million in some of the most expensive U.S. housing markets. 

Reflecting the surge in home prices during the Covid-19 pandemic, Fannie and Freddie will be able to buy loans worth $970,800 in areas including San Francisco, Los Angeles and New York, the Federal Housing Finance Agency announced Tuesday. The increased loan limits apply to single-family residences. 

Shares of Fannie and Freddie both rose about 14% to 99 cents and $1, respectively, in New York trading as of 2:15 p.m.

Fannie and Freddie don’t make mortgages. They buy them from lenders, wrap them into securities and guarantee repayment of principal and interest to investors. The federal government took control of the companies during the 2008 financial crisis and bailed them out as mortgage defaults mounted. 

In other parts of the country, loan limits will increase to $647,200 next year from $548,250 in 2021, the FHFA said. The changes are aimed at making it more affordable for Americans to purchase homes. 

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