The former director of the Office of Federal Housing Enterprise Oversight believes the on-balance-sheet portfolios of Fannie Mae and Freddie Mac should be reduced by Congress.In a speech before the National Association of Hispanic Real Estate Professionals, Armando Falcon Jr. said, "You could downsize these companies and they would be healthier, much less risky, and more mission-focused." Current OFHEO Director Stephen Blumenthal, acting in an interim capacity, has declined to take a public position on portfolio limits. Mr. Falcon, who left OFHEO a year ago, said that even with portfolio limits the two government-sponsored enterprises would be very profitable companies. Speaking at the same meeting, Freddie Mac vice president Robert Zimmer said reducing the GSEs' portfolios would only shift the mortgage risk to other financial institutions. He said it would also reduce the GSEs' ability to provide liquidity to the mortgage market and act as a stabilizing force during market disruptions. Fannie Mae also opposes portfolio limits. (See the April 24 issue of National Mortgage News for more details.)

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