Fannie Mae and Freddie Mac were “adequately capitalized” as of year-end 2003, according to a statement issued today by the Office of Federal Housing Enterprise Oversight, the safety and soundness regulator of the nation’s two secondary mortgage market corporations.

Federal law requires OFHEO to determine Freddie Mac’s and Fannie Mae’s capital levels and classifications and report its findings to Congress at least quarterly. OFHEO classifies the two corporations as “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Federal law requires the corporations to meet both minimum and risk-based capital standards to be classified as “adequately capitalized.”

Freddie Mac’s risk-based capital requirement at year-end was slightly more than $5 billion, according to OFHEO’s calculations. The corporation’s total capital of more than $33 billion on that date exceeded that requirement by approximately $28 billion.

Freddie Mac’s minimum capital requirement was approximately $24 billion at year-end. The corporation’s core capital of more than $33 billion exceeded that requirement by approximately $9 billion.

OFHEO’s calculations of Freddie Mac’s capital are based on financial information and the application of accounting policies currently involved in the restatement process. That means the regulator may need to recalculate Freddie Mac’s regulatory capital after the corporation announces its 2003 financial results.

Fannie Mae’s risk-based capital requirement at year-end was approximately $27 billion, according to OFHEO’s calculations. The corporation’s total capital of more than $35 billion exceeded that requirement by nearly $8 billion.

Fannie Mae’s minimum capital requirement was $31.5 billion at year-end. The corporation’s core capital of $34.4 billion exceeded that requirement by almost $3 billion.

OFHEO’s calculation of Fannie Mae’s capital was based on financial information and the application of accounting policies that OFHEO has under review. The outcome of that review could trigger a restatement of prior period results and a revision of the respective capital calculations, OFHEO said.

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