Fannie Mae and Freddie Mac would be able to expand their mortgage portfolios again under a legislative proposal supported by the Bush administration, according to the administration's point man on GSE reform.James Lockhart, director of the Office of Federal Housing Enterprise Oversight, said a recent compromise on government-sponsored enterprises legislation instructs the new GSE regulator to consider the size and growth of the mortgage market in regulating the portfolios. Once Fannie and Freddie get their houses in order, "it is certainly possible that a mission-focused regulation would allow the portfolios to grow with the mortgage market," the OFHEO director told an America's Community Bankers meeting in Washington. Mr. Lockhart appeared to be responding to concerns expressed by Freddie and some of its allies that the new GSE regulator could order massive portfolio cuts. "Using the legislative guidance focusing on mission, it is unlikely that there would be drastic reductions in those portfolios, but rather a reallocation," Mr. Lockhart said.

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