For the second time in as many weeks, the House Banking Committee chairman is probing whether the mortgage agencies are overstepping their government charters.

This time, Rep. Jim Leach is raising questions about Fannie Mae. According to published reports, the government-sponsored enterprise plans to enter the mortgage life insurance business, which insures the mortgage payments of homeowners in case they die.

A spokesman said the Iowa Republican is looking at the "propriety of a (government-sponsored enterprise) going into another industry with massive participation of funds that it raises at privileged rates." Rep. Leach was said to be drafting a letter to Andrew Cuomo, the secretary of Housing and Urban Development, about his concerns.

He raised a similar issue with Freddie Mac earlier this month, when that mortgage agency purchased $340 million of Philip Morris bonds for its investment portfolio. Freddie purchased the bonds with the cheap debt it can raise because of its ties to the federal government. The result was a tidy profit. The agency sold the bonds in the wake of Mr. Leach's criticism.

Mortgage life is a small, but lucrative, niche of the life insurance business, now dominated by private players.

If it does enter the business, Fannie Mae will likely grab a big chunk of the market, because it plans to essentially give away the insurance to homeowners whose mortgages it backs or buys. It will apparently make money on the giveaway because the insurers will pay Fannie interest on the premiums it pays on behalf of homeowners, and eventually refund the premiums.

Fannie did not release details of the program, which it said was still being put together. But it said it would not borrow any money to fund the premiums and said the program did not raise charter issues.

Rep. Leach's spokesman said the lawmaker was looking at whether Fannie's insurance proposal is in fact a "loan by Fannie to these insurance companies with collateral benefit to homeowners." The banking committee chairman is also examining the tax implications of the proposal, the spokesman said.

Fannie Mae and Freddie Mac are now owned by shareholders, but were founded by the federal government to enhance liquidity in the mortgage markets. Since the thrift debacle, they have emerged as the nation's largest mortgage investors-using their federal ties to edge out fully private competitors as well as reduce mortgage rates for homeowners.

In the process, they have earned handsome returns for their shareholders, and some experts say the pressure to maintain those returns will eventually drive the agencies into ancillary activities not originally authorized by the government charters.

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