Fannie Mae, the largest US home funding company, on Thursday said its massive mortgage investment portfolio, which many lawmakers would like to slash, contracted for the fifth straight month in March. Fannie Mae said its portfolio fell by an annualised 13.6 percent in March to $864.6 billion. That followed a 19.1 percent drop in February. Some lawmakers urge capping or sharply cutting the agency's mortgage holdings, saying they pose systemic economic risks. The combined mortgage holdings of Fannie Mae and its smaller counterpart, Freddie Mac, are nearly $1.5 trillion.
The companies buy mortgages and either hold them in their own portfolios or repackage them for sale to investors.
Congress is in the midst of hashing out legislation to create a more powerful regulator for these two publicly owned but government-sponsored enterprises, which are under scrutiny for accounting scandals.
Fannie's more recent accounting problems will force a multimillion dollar earnings restatement, and Freddie Mac is emerging from accounting abuses revealed in 2003.
The size of Fannie Mae's portfolio, which has fallen an annualised 16.5 percent so far in 2005, is at the heart of the legislative debate over reining in the companies.
Fannie's portfolio rose just 0.7 percent on an annualised basis in 2004, ending the year at $904.6 billion. The company's duration gap, a measure of its interest rate risk exposure, rose to plus one month in March from zero months in February.
Freddie Mac grew its retained portfolio in March by an annualised 4.7 percent, the second time it expanded in six months, albeit at a much slower pace than February's 13.5 percent growth. The portfolio stood at about $656.7 billion at the end of last month.
Fannie Mae said the $17 billion of March liquidations far exceeded its $10.6 billion in purchase commitments last month.
Outstanding mortgage-backed securities rose an annualised 8.9 percent in March, down from 13.3 percent in February, according to the agency's monthly business summary.
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