Fannie Mae and Freddie Mac have the existing capability to buy or securitize over $125 billion in subprime rescue mortgages without congressional legislation temporarily increasing the caps on their investment portfolios, according to the director of the Office of Federal Housing Enterprise Oversight."In my view, the legislation is unnecessary, unsafe and unsound, and could have the unfortunate effect to set a target for subprime purchases that the enterprises may not be able to meet safely," OFHEO Director James Lockhart says in a letter to Rep. Paul Kanjorski, D-Pa. Sen. Charles E. Schumer, D-N.Y., and Rep. Barney Frank, D-Mass., have introduced a bill to lift the cap for six months -- provided that 85% of the GSEs' purchases involve subprime loans that have been refinanced. OFHEO recently provided the two government-sponsored enterprises with additional cap flexibility. However, Fannie and Freddie responded by reducing the size of their portfolios in September. Rep. Kanjorski said he agrees with the OFHEO director's "informed assessment."

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