Congress and the Administration may be headed for a clash on yet another front - the size of Freddie Mac and Fannie Mae's owned portfolios.

On Monday Senator Charles Schumer (D-NY) introduced legislation that would provide about $72.5 billion to refinance mortgages for borrowers whose loans have or are about to reset to higher rates. The bill would also allow Freddie and Fannie to buy more mortgages in order to relieve in part the credit crunch which is preventing cash-strapped borrowers from refinancing.

The bill lifts the present cap on Freddie Mac and Fannie Mae's mortgage portfolios by 10 percent which the Senator says will allow the two government sponsored enterprises (GSEs) to pump about $145 billion into new lending. The bill would also permit the companies to purchase so-called "jumbo" mortgages, those with a value over $417,000 which would allow Freddie and Fannie to assist borrowers in areas of the county with more expensive housing.

The Bush Administration and James Lockhart, the head of the Office of Federal Housing Enterprise Oversight (OFHEO) which regulates the two GSEs have rejected suggestions that the two corporations should be allowed to purchase and hold more mortgages. Both the President and Director Lockhart in similar statement alluding to accounting irregularities discovered three years ago suggested that the GSEs should exhibit more fiscal oversight before they were allowed to increase the sizes of their respective portfolios. Both GSEs have already petitioned OFHEO asking for what would amount to an emergency increase in their portfolio limits.

Under Schumer's legislation the increases of portfolio caps and loan limits would expire after one year.