Fannie Mae and Freddie Mac will face new scrutiny from federal watchdogs, thanks to Senate Banking Committee Chairman Richard Shelby.

The Alabama Republican on Monday requested that the Government Accountability Office and the Congressional Budget Office examine the government-sponsored enterprises and the decision-making of the regulator that acts as their government custodian, the Federal Housing Finance Agency. Shelby said the reports were needed to "ensure that Congress takes steps to protect American taxpayers from risk."

The move to reassess the mortgage giants' activities comes after Federal Housing Finance Agency Director Mel Watt announced last week that the two companies would start a program to cut the debt of some underwater homeowners whose loans are backed or owned by Fannie or Freddie.

Watt's move is one of several small changes to Fannie and Freddie's status that have altered the course of housing finance policy as the government-sponsored enterprises' time in government hands stretches into an eighth year with no signs of a resolution.

Shelby asked the comptroller to investigate several questions touching on the question of whether Fannie and Freddie should be recapitalized and released from government's ownership, as some investors want, or whether they should be shuttered, as many conservatives want.

Included in the questions the GAO will try to answer is how the current set-up of the government-sponsored enterprises affects the ways mortgages are originated, funded and serviced. Fannie and Freddie don't originate mortgages, but they buy them from banks and other lenders and package them into securities for sale to investors, giving buyers guarantees in case the loans go bad.

Shelby also asked the budget office to probe what the costs of recapitalizing Fannie and Freddie would be to the taxpayer. Currently, the two companies' profits are swept into the Treasury's coffers, a situation that Watt has said could expose them to trouble in case of losses.

In the time that the government-sponsored enterprises have been in government conservatorship, Congress has failed to overhaul the housing finance system, leaving them in limbo even as they have returned to positive cash flow. Shelby's inquiries, which he requested be answered before the November elections, could help shape future legislative or administrative action.