The House of Representatives passed legislation Tuesday that would strengthen oversight of Fannie Mae and Freddie Mac, but some provisions of the bill are expected to be the subject of further Senate debate.

Approved by the House in a 313-104 vote, the Federal Housing Finance Reform Act of 2007 would create a new federal regulator for Fannie and Freddie, the Federal Housing Finance Agency.

Bush administration officials want the FHFA to have the power to limit Fannie’s and Freddie’s loan portfolios if they are determined to pose a “systemic risk” to the U.S. banking and financial system. The FHFA was to have the ability to make such a determination under compromise language worked out by Rep. Barney Frank, D-Mass., and the Treasury Department.

But HR 1427 was amended to give the FHFA less leeway to limit the government-sponsored entities’ (GSEs) loan portfolios. Although the amendment would allow the FHFA to limit the GSEs’ holdings, it could do so only if it determined a risk to the companies themselves, allowing for larger portfolios.

That’s a sore point with some Republicans. Others are also opposed to a provision of the house bill that would set aside about $500 million a year for an affordable-housing fund to be funded by Fannie and Freddie.

Passage of HR 1427 was acknowledged in a statement by the Treasury Department as “progress” on GSE reform, which said the bill in its present form does not “adequately (guard) our financial system with the necessary oversight.”

The House bill “significantly weakened” FHFA’s ability to examine systemic risk issues, said Treasury Under Secretary Robert Steel in a prepared statement. The Treasury Department is “troubled” by other provisions, including “some aspects of the affordable-housing fund,” provisions related to conforming loan limits.

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Send tips or a Letter to the Editor to matt@inman.com, or call (510) 658-9252, ext. 150.

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