President Barack Obama's plan to use mortgage-finance companies Fannie Mae and Freddie Mac to refinance as many as 5 million loans may face legal challenges over whether the administration is overstepping its authority.

The proposal may violate requirements that homeowners put up at least 20 percent of the appraised value of a home or carry mortgage insurance, said US Representative Scott Garrett of New Jersey, the ranking Republican on a panel that oversees the companies.

"I don't see how that stands in face of what the statute says," Garrett said in an interview. "It certainly seems as though they need to seek a congressional change, a legislative statutory change."