Freddie Mac's loan investment dropped for the second straight month in June. It fell to $722.2 billion for the month.

Freddie's total mortgage portfolio increased at an annualized rate of 8.9% year to date, increasing 10.3% for the month. The retained portfolio increased at an annualized rate of 3.4% year to date, but dropped at a rate of 1.4% for June.

The decline was due to loan paydowns, offsetting purchases and increased portfolio sales, which were at the highest levels in 3 years at $13.8 billion.

The debt-fund portfolio provides over 75% of Freddie's profit. It has become a hot debate topic in recent months.

Freddie Mac is the second-largest purchaser of residential mortgages. Both Freddie Mac and its rival, Fannie Mae, are under inquiry after making $15.8 billion in accounting errors since 2000.

The Office of Federal Housing Enterprise Oversight is considering limiting Freddie Mac's growth, much like Fannie Mae has had limits placed on its growth. The Bush administration contends that the high level of assets pose a systematic risk to the U.S. financial markets.

In anticipation of the limits, Freddie has sustained their debt in the $2.6 trillion agency debt market, which includes the Federal Home Loan Bank system and Farmer Mac.

Freddie Mac has announced that it plans to cut it's the outstanding reference debt, the largest and most frequently traded bonds.

"Even if Freddie Mac does not reach an agreement with OFHEO on portfolio growth limits this summer, we do not anticipate more than another $30 billion of portfolio growth the balance of this year," said Jim Vogel, head of agency research.

Up from the $15.7 billion purchased in May, Freddie has announced plans to purchase $19.1 billion in mortgage loans and securities for future settlement in June.