A couple of reports on the GSE's. ""Fannie Mae, the largest U.S. home funding company, on Thursday said that its mortgage portfolio shrank by annualized 7.2 percent in February after declining 3.1 percent in January. The retained mortgage holdings ended last month at $720.8 billion, as the portfolio extended the shrinking pattern seen each month but one dating back through all of last year."

"Fannie Mae's mortgage holdings slid by an annualized 19.6 percent last year. The company has been downsizing its portfolio because mortgage assets have been costly and there has been increased competition from other investors. Also, the company had been raising capital to meet regulatory requirements due to accounting problems that will spur an estimated $11 billion earnings restatement."

And Reuters reports that even the Chinese don't like a government subsidy for lenders. "China has no desire to create Freddie Mac or Fannie Mae style government sponsored enterprises (GSEs) to help develop its mortgage market, a former regulator of the two U.S. home funding companies said on Thursday."

"Armando Falcon, formerly a director of the Office of Federal Housing Enterprise Oversight in the U.S., said he met with senior officials from the People's Bank of China, the Chinese central bank, in January. 'The Chinese are adamant about having private sector mortgage lenders that are not reliant on government subsidies,' the former regulator of the two U.S. government sponsored enterprises (GSE) told a bond conference in Italy."

"Falcon said Freddie and Fannie were created during the Depression in the 1930s, and Americans are still living with their unintended consequences. 'The unintended consequences are their portfolios create systemic risk to the financial system,' Falcon told Reuters."

"Falcon said there is tension for Freddie and Fannie because they are shareholder owned companies with government charters. The charters require them to boost home ownership by keeping mortgage money flowing. To do this, they buy mortgages from underwriters, giving lenders money to make more loans. They pool these mortgages into securities for sale to investors, and keep some in their investment portfolios."

"'My advice to governments around the world is to try and promote private sector mortgage lending not reliant on government subsidies,' Falcon said."