Office of Federal Housing Enterprise Oversight Director James B. Lockhart unexpectedly lifted caps as of March 1 on the value of mortgages that can be held in the portfolios of Fannie Mae and Freddie Mac, a move that theoretically could result in capital flowing into mortgage markets squeezed by the credit crunch.

It is unclear, however, whether investors will be willing to take risks with even larger portfolios than exist now. If investors don't buy in, the move would have little effect on the mortgage markets.

In a statement, Lockhart said, "In recognition of the progress being made by both companies, as indicated by the timely release of their 2007 audited financial statements, and consistent with the terms of the relevant agreements, OFHEO will remove the portfolio growth caps for both companies on March 1, 2008."

Lockhart also said OFHEO would revisit its requirment that Fannie and Freddie maintain a 30% capital cushion above the reserve requirements that are set by law. That could also theoretically increase the amount of mortgage money available.

"OFHEO will discuss with its management the gradual decreasing of the current 30 percent OFHEO-directed capital requirement," he said. "The approach and timing of this decrease will also include consideration of the financial condition of the company, its overall risk profile, and current market conditions."