Last Thursday Fannie Mae announced that its gross mortgage portfolio shrank for the fifth consecutive month to its lowest level since July 2003. The GSE's investment portfolio fell by a 13.6% annualized rate in March, after dropping 19.1% in February, according to Fannie's monthly volume summary. This is not surprising as the GSE still has to comply with the September deadline to reach the capital requirement set by the Office of Federal Housing Enterprise Oversight.

The GSE's commitment to buy mortgages jumped to $10.59 billion in March, the most since November from only $3.1 billion in February. Analysts said this could be seen as a sign of future portfolio growth. However, commitments could not catch up with liquidations - rising to $17 billion in March from $15.55 billion in February - as well as $4.8 billion in outright sales, even though March sales fell from $9.54 billion in February. The quarter's sales have reached $20.7 billion, which has exceeded the $16.45 billion mortgage bonds sold during the whole of 2004.

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