Freddie Mac said Friday its retained portfolio shrank in January for the first time in three months, contracting at an annualized rate of 9.9 percent to $704.2 billion.

The contraction followed a 29.9 percent gain in December, reports said.

The company bought $12.4 billion for its retained portfolio in January, down from December’s $36.2 billion, it said in its monthly volume summary.

Alan Greenspan, then-chairman of the Federal Reserve, last year told the House Financial Services Committee he sees “no reasonable basis” for Freddie Mac and its fellow government-sponsored enterprise, Fannie Mae, to hold enormous mortgage portfolios.

Both the White House and Greenspan have said 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.

“The portfolio decline was mainly a product of our desire to be opportunistic, and the spreads between mortgage-backed securities and agency debt were not conducive for growth,” said Michael Cosgrove, spokesman for Freddie Mac, according to Reuters. “The tightness of spreads gave us fewer opportunities to grow.”

Freddie Mac’s contraction in January primarily stemmed from the company holding fewer of its own fixed-rate mortgages, called participation certificates, or PCs, in its portfolio. The company also held fewer agency and non-agency securities.

Both Freddie Mac and Fannie Mae have been rocked by accounting scandals. 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.

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