Bid Expands Fannie And Freddie Role InSecondary Market

WASHINGTON - (10/27/05) -- The House overwhelmingly passed abill Thursday to increase oversight of Fannie Mae and Freddie Mac,but the measure would also expand the reach of the two mortgagegiants in the secondary market by allowing them to purchaseso-called jumbo mortgages in high-priced markets. The bill passedthe House on a 331-to-90 vote after lawmakers defeated severalamendments, including one to strike a provision allowing Fannie andFreddie to buy mortgages over the current $360,000 conforming loanlimits, up to $540,000 in certain markets. Lawmakers also trimmedback a controversial proposal requiring Fannie and Freddie to setaside hundreds of millions of dollars each year to fund affordablehousing projects, by restricting the funding to those entitieswhich do not participate in partisan politics. Most of theestimated $3 billion over the first two years would be targeted forreconstruction of Louisiana and other areas hit by HurricaneKatrina. But the bill, which would create a new regulator forFannie, Freddie and the Federal Home Loan Banks, is in for roughsledding once it gets to the Senate, where leaders support a WhiteHouse-backed proposal to enforce strict limits on the portfolios ofthe two secondary market giants. After the vote, Senate BankingCommittee Chairman Richard Shelby balked at the House bill, sayingit lacked "core elements that must be included" in any legislation,such as the portfolio limits, which is not in the Housebill.