Last week, the House Financial Services Committee passed a heavily negotiated bill which creates a new regulator for Fannie Mae (NYSE:FNM), Freddie Mac (NYSE:FRE), and the 12 Federal Home Loan Banks.

The legislation would strengthen oversight of the government-sponsored housing enterprises by creating a new regulator with increased control over their portfolios and capital requirements. While not specifically limiting the size of Fannie's and Freddie's massive combined $1.4 trillion portfolios, the new regulator could enact restrictions as necessary, such as requiring a higher amount of capital held during certain situations.

The bill's most controversial aspect, championed by committee chairman Rep. Barney Frank (D-Mass.), is the inclusion of an affordable housing fund, financed by Fannie and Freddie based on the sizes of their portfolios. The five-year fund is estimated to bring in more than $500 million per year, with proceeds benefiting housing programs in such places as the hurricane-ravaged areas of Louisiana and Mississippi. Republicans opposed this fund, charging that it amounted to a tax on homeowners supported by the two GSEs, since fees might have to be raised to cover costs.

The larger fight over the proposed legislation is far from over. The Senate has yet to introduce a bill, and it's thought that Republicans may seek more restrictive measures. Further haggling over the affordable housing fund will also surely continue. Given the subprime sector shakedown and Fed Chief Ben Bernanke's support for tying the agencies' portfolios to affordable housing products, it's likely that the fund concept will remain in some form.

The original mandate of Fannie and Freddie to make home ownership affordable for low- and moderate-income people makes the concept of an affordable housing fund a legitimate issue to consider. However, the GSEs do this effectively in their everyday role of purchasing mortgage loans and repackaging them into saleable securities. Freddie, for example, has financed one out of every six homes in this country, and it's recently announced that it is trying to develop new subprime products aimed at providing safer financing alternatives.

Perhaps the best way to advance the idea of affordable housing availability is to first request hard data regarding any new potential financing tools, as well as more details as to the projected economic impact of a proposed fund, before imposing a fund requirement.

There's no doubt that accounting irregularities have to be cleaned up and confidence restored, but an increase in long-term capital requirements would be unnecessary and harmful. Mandatory excess capital drags on earnings, and both Fannie and Freddie already have a $2.5 billion line of credit with the U.S. government, effectively guaranteeing their debt. Oversight of the GSEs is critical, but so is allowing them flexibility to achieve their mission while responding to market needs.

For now, Fannie and Freddie just received official word from the Office of Federal Housing Enterprise Oversight that their required reserves were adequately capitalized as of Dec. 31. That's not much of a surprise to informed investors, nor is the idea of continued contentious debate over Fannie's and Freddie's future.

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Fool contributor S.J. Caplan does not own shares of the companies discussed in this article. The Fool has a disclosure policy.