Fannie Mae and Freddie Mac, the two largest financiers for the U.S. mortgage market, will see their portfolio growth caps removed as of March 1, 2008. According to a statement released Wednesday by the Office of Federal Housing Enterprise Oversight, which regulates both GSEs and had imposed the portfolio restrictions in response to massive accounting errors, the move comes as "recognition of the progress being made by both companies, as indicated by the timely release of their 2007 audited financial statements." Fannie Mae reported 2007 earnings earlier today; Freddie Mac is scheduled to release its annual earnings report tomorrow. "These steps constitute an important milestone in remediation of their respective operational and control weaknesses that led to multi-year periods when neither company released timely, audited financial statements," said OFHEO director James Lockhart. Lockhart also signaled that it may ease capital requirments at the GSEs. A current Consent Order requires Fannie and Freddie to maintain a capital level at least 30 percent above the statutory minimum, the result of financial and operational uncertainties associated with past accounting problems. OFHEO will likely look to gradually decrease the 30 percent requirement in the months ahead, Lockhart said. Shares in Fannie and Freddie surged on the announcement. Fannie Mae shares were up 10 percent to $29.68 in heavy trading on the New York Stock Exchange Wednesday morning, while Freddie Mac saw its shares jump 7.5 percent to $27.10. Disclosure: The author held no positions in FNM or FRE when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.