The Office of Federal Housing Enterprise Oversight said Friday that it will not increase the portfolio caps on Fannie Mae and Freddie Mae, referring to the two companies -- in a letter to a key senator -- as "significant supervisory concerns."As previously reported, Fannie Mae had asked OFHEO to increase its portfolio capacity by 10% (roughly $72 billion) as a way to add some liquidity to the nonprime secondary market. In a statement, OFHEO said it is "exploring with each enterprise ways for them to enhance their support for affordable housing, both multi-family and single." The regulator said there is nothing wrong with the conventional secondary market, noting that the two government-sponsored enterprises securitized $500 billion in the first half alone. The agency recently received an inquiry from Sen. Charles E. Schumer, D-N.Y., about the nonprime liquidity crisis and the GSEs' possible role in easing conditions. OFHEO Director James Lockhart told Sen. Schumer that the GSEs have been meeting the needs of their seller/servicers, but he said they remain supervisory concerns "after more than three years of remediation efforts."

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