- The Washington Times - Wednesday, May 25, 2005

ASSOCIATED PRESS

A House panel moved yesterday toward approving legislation that would strengthen the government’s hand over mortgage giants Fannie Mae and Freddie Mac but falls short of the Bush administration’s proposal to reduce their multibillion-dollar holdings.

Republican lawmakers are pushing to rein in the two powerful, government-sponsored companies recently beset by accounting scandals. Minority Democrats’ attempts to reshape some aspects of the legislation were mostly unsuccessful as the House Financial Services Committee debated the measure.

“We shouldn’t go overboard here,” said Rep. Paul E. Kanjorski, Pennsylvania Democrat, referring to the bill’s creation of a new, stronger federal regulator with authority over Fannie Mae and Freddie Mac, the two biggest U.S. buyers of home mortgages.

The measure also would expand the government-set goals for the companies for making home ownership affordable by requiring them to devote 5 percent of their annual profits to financing housing for low-income people.

In addition, the companies would be allowed to buy bigger mortgage loans than currently — the limit is now $359,650 — in high-cost states like California.

The congressional action comes amid a superheated U.S. housing market that has created concern that the industry could be experiencing a speculative bubble similar to the stock market bubble that burst five years ago.

Congress created Fannie Mae and Freddie Mac to inject money into the home-loan market, with a view to keeping mortgage rates lower. The companies buy mortgages from banks and other lenders and bundle the loans into securities for sale.

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