The GSEs and their regulator, the Office of Federal Housing Enterprise Oversight, continued to make headlines after the Department of Housing and Urban Development released a report suggesting that the OFHEO's recent investigation of Fannie Mae's accounting rules was politically motivated. To further complicate matters, the Senate and House of Representatives also asked for a change in the OFHEO leadership as part of the $388 billion spending bill providing funding for the different cabinet departments.

Analysts said these developments currently have no direct impact on the MBS market, however, the critical report casting the OFHEO's Director Armando Falcon, Jr. and Deputy Director Stephen Blumenthal in a negative light slightly increases the chances that a GSE regulatory reform bill will pass in 2005. The report tarnishes the reputation of the OFHEO among members of Congress, said analysts, and may increase support for transferring GSE regulation to the Treasury.

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