Fannie and Freddie May Sell Modified Loans

Modified mortgages held by ""Fannie Mae"":http://www.fanniemae.com and ""Freddie Mac"":http://www.freddiemac.com could go up for sale at some point, according to the companies' regulator.

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Edward DeMarco, acting director of the ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA), told lawmakers that his organization is considering putting non-performing and modified loans from the two companies' books on the market.

Since the GSEs were seized by the government in late 2008, they have completed modifications on 849,000 mortgages, DeMarco said in testimony before the House Subcommittee on Capital Markets and Government Sponsored Enterprises.

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The sale of these assets is one option being discussed as part of the agency's strategy to shrink Fannie and Freddie's portfolios.

Their conservatorship mandates that the size of each firm's holdings be reduced by 10 percent each year, though DeMarco says he plans on trimming at a faster rate than that. The GSEs' combined portfolios currently sit at $1.4 trillion.

DeMarco said FHFA is ""looking at a range of possible structures"" for disposing of assets and the route they'd take to ""execute those sales is under review and discussion.""

""FHFA as conservator needs a certain amount of regulatory discretion to exercise its best judgment to preserve and conserve the Enterprises' assets,"" DeMarco testified. ""Discretion is particularly important when disposing of assets.""

DeMarco explained that under the limits set by the conservatorship, the retained mortgage portfolios of each should be no more than $729 billion by the end of this year.

As of the end of March, Freddie Mac's mortgage assets already were below the limit at $692 billion. Fannie Mae's were $758 billion but are expected to be below the limit by year-end, according to DeMarco.