Fannie and Freddie May Face New Rules

REALTOR® Magazine Daily Real Estate News July 9, 2008

Shares of Fannie Mae and Freddie Mac rose Tuesday after falling precipitously on Monday over worries that new accounting standards would require them to raise new capital.

The Financial Accounting Standards Board is reviewing a rule that might force financial firms to take mortgage-backed securities that are currently off their balance sheets and place them on balance sheets.

If Fannie and Freddie were to have to add portions of their securitizations business back on to their balance sheets, Fannie Mae would need to raise $46 billion in cash to meet capital requirements. On the other hand, Freddie Mac would need to raise $29 billion, Lehman Brothers analyst Bruce Harting wrote in a research note Monday.

The accounting board has made no decision on changing its rules, and any proposal would include a "rigorous" review process that would likely take several months, Neal McGarity, a spokesman for the group said.

Source: The Associated Press, Stephen Bernard (07/08/08)