Senate Banking Committee Chairman Richard Shelby, R-Ala., does not want a affordable housing fund to be based on GSE profits, a committee spokesman said, and the senator is considering other "mechanisms" in drafting a GSE regulatory reform bill."There are better mechanisms to refocus" Fannie Mae and Freddie Mac on affordable housing, committee spokesman Andrew Gray said. Committee Democrats support a proposal, drafted by Sen. Jack Reed, D-R.I., that would require the two government-sponsored enterprises to contribute 5% of their profits to an affordable housing fund. But Sen. Shelby is concerned that it would encourage the GSEs to increase their profits by expanding the size of their mortgage portfolios. Sen. Reed discounted those concerns. "We hope the new GSE regulator will very carefully monitor not just this housing program, but their overall portfolios," he told MortgageWire. Earlier this year, the Mortgage Bankers Association recommended to the House and Senate banking committees that Fannie's and Freddie's contributions to an AH fund could be tied to a percentage of their outstanding debt, which would act as a restraint on portfolio growth. "It creates a different set of incentives, and it is one that may be gaining new currency," the MBA's top lobbyist Kurt Pfotenhauer said.

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