Bill would slash Fannie, Freddie assets

WASHINGTON — A bill in the U.S. Senate aimed at tightening oversight of Fannie Mae and Freddie Mac would sharply reduce the companies’ massive mortgage portfolios, forcing the two government-sponsored enterprises to sell off most of their assets held solely for investment purposes, according to a summary of the bill released Friday.

The legislation, sponsored by Senate Banking Committee Chairman Richard Shelby, R-Ala., largely embraces proposals by the Bush administration and the Federal Reserve that would restrict the types of assets the GSEs could own.

Fannie and Freddie would largely be restricted to their primary business of securitizing mortgages, which allows them to purchase and hold loans only until they can package them as securities for sale to other investors.

In addition to those assets, the companies could hold in portfolio mortgages that help them meet their affordable housing requirements or that are necessary to their credit guarantee business. They could also keep cash, Treasury securities, real estate acquired through foreclosure as well as the actual buildings they use to run their business, according to the summary released by the committee.

The legislation also appears to embrace several other proposals pushed by the Bush administration. It doesn’t, however, include a controversial affordable housing fund sought by Democrats.