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Feds waive capital rules for Fannie, Freddie

Regulators say companies are undercapitalized

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Federal regulators have made an official determination that Fannie Mae and Freddie Mac are undercapitalized, but have suspended rules that would have required the companies to raise additional money. The Federal Housing Finance Agency, which placed Fannie and Freddie into conservatorship on Sept. 7, said today that Fannie and Freddie have effectively been undercapitalized since June 30. But the Treasury Department's backstop of the companies -- a line of credit and purchase of senior preferred stock -- ensures that "for the very long term both entities will have positive net worth," and will be allowed to continue purchasing and guaranteeing mortgages, FHFA said. Before being placed into conservatorship, Fannie calculated its core capital of $47 billion represented a $9.4 billion surplus above that required by regulators. Freddie Mac said its $37.1 billion in core capital exceeded regulatory requirements by $2.7 billion. The continued market downturn during late...