The Office of Federal Housing Enterprise Oversight
is lifting the portfolio caps on Fannie Mae and Freddie Mac,
which will allow the two government-sponsored enterprises
to provide more liquidity to the mortgage market and invest in jumbo mortgages.

OFHEO will remove the portfolio growth caps for both companies
on March 1, 2008, OFHEO Director James Lockhart said.
The unexpected action gives the GSEs more room to use
their new authority to purchase jumbo mortgages and hold
them in portfolio until they can securitize the higher-balance mortgages.

Mr. Lockhart noted that Fannie and Freddie are filing their
2007 annual financial reports on time, which shows they have made substantial progress in fixing their accounting
systems and internal controls as specified in separate
consent orders.

The consent orders also require the GSEs
to maintain a 30% capital surplus. The OFHEO director
signaled that he will begin discussions with Fannie and
Freddie to gradually lower the capital surplus.