Mortgage giant Fannie Mae, the largest U.S. home funding company, said on Thursday its mortgage portfolio slumped an annualized 25.3 percent in July, the portfolio’s ninth consecutive monthly decline.

Fannie Mae’s retained portfolio totaled $788.8 billion at the end of July, down from $808.2 billion at the end of June.

The portfolio has shrunk at an annualized 20.9 percent so far this year as Congress continues to work on legislation that will curb or slash the company’s mortgage holdings following an accounting scandal.

Portfolio purchases of $9.4 billion last month and sales of $9.3 billion, combined with a $1.1 billion increase in portfolio liquidations to $19.6 billion, caused the shrinkage, the company said in its July summary report.

Fannie Mae’s mortgage portfolio grew 0.7 percent in all of 2004.

Fannie Mae has been shrinking its portfolio to bolster its capital cushion and meet regulatory requirements as it struggles to resolve accounting problems uncovered by the Office of Federal Housing Enterprise Oversight last year that led to the possible restatement of as much as $12 billion in previously reported earnings.

Both the White House and Federal Reserve Chairman Alan Greenspan say Fannie Mae and Freddie Mac pose a risk to the economy because they have grown too large. Legislation to curb the company’s mortgage holdings is currently under consideration in Congress.

In December 2004, Fannie Mae replaced Franklin Raines, its chairman and CEO, who announced he was taking early retirement, and Fannie Mae’s chief financial officer, Timothy Howard, resigned Dec. 21.

Fannie Mae’s financial accounting troubles have drawn shareholder lawsuits and investigations by the Justice Department and the Securities and Exchange Commission.

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