WASHINGTON - How independent will the new Office of Federal Housing Enterprise Oversight really be?

The answer may come soom from the Senate Appropriations Committee. The head regulator, Aida Alvarez, has asked for funds to hire a staff of 60 to regulate the Federal National Mortgage Association and Federal Home Loan Mortgage Corp.

The panel's response could well determine whether Ms. Alvarez can rely on the office's own resources to fulfill its congressional mandate.

The staff she is seeking would be twice as large as the Department of Housing and Urban Development projected last year when Congress created the regulator's office.

|Not Going to Fight It'

Though some on Capitol Hill worry that Ms. Alvarez is presiding over a ballooning agency, observers like her chances of getting the extra money.

"My sense is, if the Congress isn't paying for it, they're not going to fight it," said a Republican House staff mamber.

Ms. Alvarez said both corporations support her staffing efforts, but Mitchell Delk, vice president for government and industry relations at Freddie Mac, voiced concern about budget and staff size.

"A visceral reaction is that it's excessive," Mr. Delk said. Ms. Alvarez will not need as large a staff in the future as she needs now, he said, but it will be difficult to trim staff then.

Ms. Alvarez's office is funded through fees paid by Fannie and Freddie. But the office's budget is approved by the two appropriations committees. The House panel has already approved a smaller budget. For the amount to be increased, the Senate would need to authorize the larger sum and the House would need to go along.

Wants Independent Experts

In an interview on Monday, Ms. Alvarez said she was asking Congress for a larger staff because she wants to hire independent financial experts, examiners, and lawyers to set and monitor capital standards for Fannie Mae and Freddie Mac.

Under HUD's model, she would have been more reliant on that department's lawyers and staff, who she said are already stretched thin.

Industry sources said the staffs size, composition, and pay scales would be critical to Ms. Alvarez's independence and effectiveness as a regulator.

"Every regulated entity is trying to get the regulator to see things their way. This is going to be a very, very delicate relationship," said Brian Smith, director of policy development at the Savings and Community Bankers of America.

"Is she going to have competitive pay scales?" he asked. "If not, are they going to have defensive bureaucrats constantly homswoggled by capital market sophisticates?".

Ms. Alvarez said she expected to pay her staff at rates comparable to those paid by other regulatory agencies in Washington. She also hopes to use headhunters to hire financial talent from Wall Street, if she can do that under federal rules.

She expects to hear by mid-September from the Senate on the funding request. She has hired five staffers so far.

In addition to the $5.7 million already budgeted for the 1994 fiscal year, Ms. Alvarez has requested $1.3 million for the year beginning Oct. 1. She also has $3 million intended as start-up costs for the 1993 fiscal year.

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