NEW YORK (CNNMoney.com) -- The appointed director of the Office of Federal Housing Enterprise Oversight said Fannie Mae and Freddie Mac should both be allowed to prop up the U.S. home mortgage market if banks, hedge funds and institutional investors shy away in times of financial turbulence, according to the Wall Street Journal.

James Lockhart's words come as a debate continues between the Bush Administration, which wants the companies to sell off their combined $1.4 trillion in mortgages and related securities, and housing industry officials and members of Congress, who see value in funding the companies offer the housing market, the newspaper said.

Lockhart says the size of the portfolio creates a risk to financial markets if the companies lose control of their interest rate risk. Still, Lockhart says smaller portfolios would be appropriate to ensure plenty of money is available for home loans.

Both Fannie Mae and Freddie Mac have been hit with accounting and financial-reporting problems.