Present Requirement

Disclosure of Capital Positions During Conservatorship

The Director has determined that it is prudent and in the best interests of the market to suspend capital classifications of Fannie Mae and Freddie Mac during the conservatorship, in light of the United States Treasury's Senior Preferred Stock Purchase Agreement.  FHFA will continue to closely monitor capital levels, but the existing statutory and FHFA-directed regulatory capital requirements will not be binding during the conservatorship.

During the conservatorship, FHFA will not issue a quarterly capital classification.  The Enterprises will continue to submit capital reports to FHFA during the conservatorship. Relevant capital figures (minimum capital requirement, core capital, and GAAP net worth) will be available in the Enterprises' quarterly 10-Q filings, as well as on FHFA's website to ensure market transparency.  FHFA does not intend to publish critical capital, risk-based capital, or subordinated debt levels during the conservatorship. 

Capital Disclosures Under Conservatorship


Prior Requirements

Specific measures of capital are defined in statute and constitute the minimum base of capital required by the Enterprises to achieve a classification of adequately capitalized. Other quantitative measures of capital may be used by OFHEO in assessing capital adequacy.

Minimum Capital  (12 USC 4612)

Minimum capital is a leverage ratio defined in statute that constitutes a base level of capital considered prudent to maintain safety and soundness. The statutory minimum capital level is defined as: 2.5% of aggregate on-balance sheet assets, and 0.45% of off-balance sheet obligations (12 USC 4612).   The definition of core capital is at 12 USC 4502(4). Currently both Enterprises maintain a capital surplus over the statutory minimum capital requirement.  Please see "OFHEO-Directed Minimum Capital Requirements" section below.

Critical Capital   (12 USC 4613)

Critical capital is a leverage ratio defined in statute.  Enterprises that fall below the critical capital level are critically undercapitalized and would normally result in the appointment of a conservator. Core capital is defined at 12 USC 4613.  

Risk-Based Capital    (12 USC 4611)

By statute and regulation, OFHEO’s risk-based capital stress test is defined as a cash flow stress test that determines the amount of total capital for the Enterprise that is sufficient to maintain positive capital during a 10-year defined stress period. This is met with total capital as defined in 12 USC 4502(17).

OFHEO-Directed Minimum Capital Requirements:

The effective dates of the OFHEO-directed requirements are noted in the respective documents hyperlinked from other locations within OFHEO's web site.

FREDDIE MAC: 
    20 percent  
    30 percent 


FANNIE MAE: 
    15 percent  
    20 percent  
    30 percent  

Capital Classification Process

On a quarterly basis, OFHEO is required by statute to classify the Enterprises' capital and disclose those results.  See prior periods' capital classification news releases. OFHEO achieves this requirement through appropriate correspondence with the Enterprises on both a proposed classification and a final classification, following a response period from the Enterprises, as required by statute. Simultaneous to the final classification, OFHEO also sends appropriate notice of the classification to appropriate U.S. Senate and House of Representative members. A public disclosure of the quantitative positions, as well as the capital adequacy conclusion, is also made. OFHEO provides a history of the capital positions on its web site for public reference. OFHEO does not provide public disclosure of the various qualitative assessment criteria or other proprietary information in its quarterly public release.

MORE INFORMATION:

12 USC 46:    GOVERNMENT SPONSORED ENTERPRISES is available at:
http://uscode.house.gov/download/pls/12C46.txt.

RISK-BASED CAPITAL (FINAL RULE) - Amended 2/13/2003
MINIMUM CAPITAL incorporated in CAPITAL (sec. 1750.1 - 4) (2/13/2003)
RISK-BASED CAPITAL REGULATION AMENDMENT (6/26/06)
TECHNICAL AMENDMENT TO RISK-BASED CAPITAL REGULATION (12/14/06)