Fannie, Freddie May Raise $20 Billion: Report

Reuters (03/28/08); Stempel, Jonathan
The Office of Federal Housing Enterprise Oversight (OFHEO) recently cut Fannie Mae and Freddie Mac's minimum capital level to 20 percent from 30 percent so that the government-sponsored enterprises (GSEs) can add liquidity to the struggling mortgage market by purchasing as much as $200 billion in mortgage-backed securities. However, OFHEO director James Lockhart says up to $20 billion in capital must be raised by the GSEs prior to an additional cut in their capital threshold. He notes that they could use common shares, preferred shares or convertible preferred shares to raise the money "sooner rather than later."