Fannie Mae (FNM), the largest U.S. home funding company, said on Friday its mortgage portfolio fell by an annualized 16.3 percent in April, its sixth straight monthly drop.

The size of the massive portfolio, which is down 16.5 percent year-to-date, is a bone of contention with lawmakers who are aiming for stiffer oversight of the government-sponsored enterprise which is battling its way through an accounting scandal.

The portfolio stands at $851.9 billion, about $26 billion less than the end of May 2004. Last month Fannie Mae sold more of its mortgage assets and bought fewer mortgage securities, according to the company's monthly volume summary.

The portfolio shrank 13.6 percent in March, 19.1 percent in February and 16.8 percent in January.

Fannie Mae has been reducing its portfolio to bolster its capital cushion and so meet regulatory requirements as it works through accounting problems that it has said will lead to a multibillion-dollar earnings restatement.

The Washington-based company said it bought $8.9 billion in mortgage loans and securities for its investment portfolio last month, down from March's $11.2 billion.

The company's average duration gap, a measure of its interest rate risk exposure, was minus one month in April after being plus one month in March. This measures the difference in months between the durations of assets and liabilities in the company's mortgage portfolio.

A negative duration gap indicates Fannie Mae's payments to its debt holders outpace the income it receives on its assets.

Fannie Mae aims to keep its duration gap within a range of plus to minus six months.

While Fannie Mae's portfolio has been shrinking, that of another GSE, Freddie Mac (FRE), has been growing.

This week Freddie Mac said its retained mortgage portfolio grew at an annualized rate of 9.8 percent in April to $662.1 billion, the third consecutive time it expanded its book of mortgage investments.

The House Financial Services Committee (search) passed a bill to stiffen oversight of Fannie and Freddie on Wednesday, saying the legislation creates a strong regulator.

Under the bill sponsored by Republican Reps. Michael Oxley of Ohio and Richard Baker of Louisiana, the regulator has authority to set capital standards, approve new business activities and place a failed GSE in receivership.

The bill also gives the regulator authority to order adjustments to the companies' investment portfolios, which currently total some $1.5 trillion.

Fannie Mae and Freddie Mac are shareholder-owned companies charged by Congress with boosting home ownership by ensuring liquidity in the mortgage market. They buy mortgages from originators and repackage them for sale to investors or to keep in their portfolios.