Fannie Mae, Freddie Mac rally; OFHEO says GSEs were adequately capitalized

BOSTON, Dec 28, 2007 (Thomson Financial via COMTEX) -- FRE | charts | news | PowerRating -- Shares of Fannie Mae and Freddie Mac rose Thursday after the Office of Federal Housing Enterprise Oversight (OFHEO) said the two housing government-sponsored enterprises were adequately capitalized as of Sept. 30.

OFHEO, the safety and soundness regulator for Fannie Mae and Freddie Mac, said Fannie Mae's core capital was $41.7 billion as of Sept. 30, which exceeded the OFHEO-directed capital requirement of $39.4 billion by $2.3 billion.

The OFHEO-directed capital requirement, according to OFHEO, is the amount of total capital that an enterprise must hold to "absorb projected losses flowing from future adverse" interest rate and credit risk conditions specified by statute, plus 30% mandated by statute to cover management and operations risk.

As of Sept. 30, Fannie Mae's risk-based capital requirement was $24.7 billion, while the company's total capital of $43.1 billion on that date exceeded the requirement by $18.4 billion, OFHEO said.

OFHEO reported that Freddie Mac's core capital was $34.6 billion, which exceeded the OFHEO-directed capital requirement of $34 billion by $600 million as of Sept. 30.

In addition, OFHEO said Freddie Mac's risk-based capital requirement was $11.3 billion, while the company's total capital of $36.4 billion on that date exceeded the requirement by $25.1 billion.

The regulator noted that both Fannie Mae and Freddie Mac raised capital through the preferred stock market in the third quarter to enhance their capital base.

And, while the Sept. 30 classification is only based on the capital position at the end of the quarter, OFHEO said that the increase to the capital bases of both enterprises is "prudent considering both market conditions and the need to maintain sufficient capital."

Shares of Fannie Mae rose 2.7% to $39.85, and reached a 6-week high of $40.17 in intraday trading. Freddie Mac jumped 5.3% to $34.13. Casey Logan cl/tk1

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