GOP Bill Would Restrict GSE Portfolios

Fannie Mae and Freddie Mac could add only affordable housing loans and securities to their mortgage investment portfolios under a regulatory reform bill introduced by four Republican GSE hardliners on the Senate Banking Committee."This bill would refocus the GSEs' practices and investments on affordable housing, thereby reducing systemic risk," Sen. John Sununu, R-N.H., said. Any mortgages or mortgage-backed securities acquired by the government-sponsored enterprises after enactment of the bill would have to meet the affordable housing goals set by the new GSE regulator or be "promptly securitized and sold to third parties," the bill says. Both GSEs have $700 billion portfolios, and the regulator could make "temporary adjustments" to avoid market disruptions. Sens. Sununu, Chuck Hagel (Nebraska), Elizabeth Dole (North Carolina), and Mel Martinez (Florida) are the Republican co-sponsors of the bill. Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., has not circulated a GSE bill yet.