Freddie Mac announced on Tuesday that it has agreed to limit the size of its $722.2 billion mortgage portfolio. Under the agreement - which was voluntarily accepted by the GSE after being pressured by its regulator the Office of Federal Housing Enterprise Oversight (OFHEO) - the firm's mortgage holdings will grow no more than 2% above the level it was at last June 30. Mortgage holdings account for about two-thirds of the company's profit.

"Simply put, we would say our regulator made a request of us and we provided the response to their request," said Richard Syron, Freddie Mac chairman and CEO, in a conference call late Tuesday afternoon. "We acted because we believe a constructive relationship with our regulator is necessary and essential to our ability to generate long-term shareholder value."

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