The head of Freddie Mac, one of the biggest U.S. mortgage finance companies, dismissed suggestions that his company should step in to bolster sagging financial markets by buying distressed loans, the New York Times reported on Saturday.

Freddie Mac chief executive Richard Syron said he was wary of calls for Freddie Mac and fellow mortgage finance company Fannie Mae to buy loans and securities no longer favored by private investors, the Times said.

With credit pools drying up there are some loans that are in difficulty, the Times quoted Syron as saying in a telephone interview.

There are other loans that probably should never have been made and providing more liquidity will make that situation worse in the long term, Syron told the Times.

Syron said Freddie Mac's portfolio size was limited by an agreement reached with regulators.

Default rates in the subprime segment of the U.S. mortgage market, which serves borrowers with poor credit histories at high interest rates, have jumped in recent months as the housing industry has slowed and home prices have fallen.

The Office of Federal Housing Enterprise Oversight, which regulates both Fannie Mae and Freddie Mac, in July directed them to avoid loans that did not meet standards set in June by bank regulators.

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