House debates Freddie, Fannie Mae legislation

WASHINGTON (AP) — A House committee on Wednesday debated legislation that would strengthen government oversight of Fannie Mae and Freddie, the big mortgage companies.

The measure falls short of the Bush administration's proposal to reduce the companies' multibillion-dollar holdings.

Republicans are pushing to rein in the two powerful, government-sponsored companies that have been beset by accounting scandals. Efforts by Democrats to reshape the bill generally failed in the GOP-controlled House Financial Services Committee.

The bill would create a stronger federal regulator with authority over 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. It would require that the companies devote 5 percent of their annual profits to financing housing for low-income people.

In addition, the companies could buy bigger mortgage loans than is currently allowed in high-cost states such as California. The limit now is $359,650.

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 to investors or keep them as investment holdings.