Regional home loan banks will be allowed to boost holdings of mortgage-backed securities by more than $100 billion, federal regulators announced Monday, (pdf) in still another effort to both increase liquidity to and stabilize the mortgage market.

The decision by the Federal Housing Finance Board enables banks in the Federal Home Loan Bank system to increase their holdings of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) securities. The FHFB said it will let banks use their existing capital to increase their holdings of agency mortgage-backed securities for two years. The purchases are restricted to securities guaranteed by Fannie Mae and Freddie Mac.

The move comes one week after the regulator for Fannie Mae and Freddie Mac eased capital requirements for the two home mortgage purchasers, enabling them to add another $200 billion into the mortgage market.

Further, while the overall combined capital infusion amount, about $350 billion, represents a fraction of the $4.5 trillion in mortgage backed securities backed by Fannie Mae and Freddie Mac, economists generally agree the money represents a non-insignificant piece of the housing recovery puzzle.

Housing Sector Analysis: Another positive data point for the U.S. housing sector, which brings the total positive data points this Monday to two, a record of late for the beleaguered sector. The additional capital amount is small, in market terms, but every additional capital amount, or investor, helps, to use a cliché. Still, investors (and homebuyers) should keep in mind that the nation faces at least another two quarters of housing sector consolidation, with a 9.6-month supply of existing homes for sale documenting that reality. Until inventory levels drop for several months in a row, economists and analysts will be reluctant to make bolder statements about the housing sector's health.