Fannie Mae last Friday reported success with its financial diet, having shrunk its mortgage portfolio by an annualized 2.8 percent in November, the mortgage giant’s 13th consecutive monthly decline.

Fannie Mae’s retained mortgage holdings totaled $715.5 billion at the end of November, down from $717.3 billion at the end of October, the government-sponsored enterprise said in its monthly summary report.

Year-to-date, the Washington-based company’s portfolio has shrunk at an annualized 22.6 percent pace as it took action to meet a Sept. 30 core capital requirement imposed by its regulator, the Office of Federal Housing Enterprise Oversight.

In 2003, OFHEO discovered accounting irregularities by Fannie Mae, setting off shareholder lawsuits and investigations by the Justice Department and the Securities and Exchange Commission. As a result, the company will have to restate earnings by as much as $12 billion. The capital requirement was part of the fallout from the discovery.

The massive size of the portfolios of Fannie Mae and its fellow government-sponsored enterprise, Freddie Mac are under scrutiny as Congress considers legislation to create a new, stronger regulator for the government-sponsored enterprises.

In its monthly summary report, Fannie Mae said portfolio purchases rose to $16 billion in November from $10.1 billion the previous month, while net retained commitments rose to $20.8 billion, as spreads on investments widened modestly and portfolio sales fell.

November’s contraction followed a larger 16.1 percent annualized rate of contraction in October.

Fannie’s mortgage portfolio grew 0.7 percent in 2004, the company said.

***

What’s your opinion? Send your Letter to the Editor to janis@inman.com; (510) 658-9252, ext. 140.

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