Lockhart Pooh-Poohs GSE Capital Concerns

Proposed changes in accounting rules that could force Fannie Mae and Freddie Mac to move certain mortgage-backed securities onto their balance sheets should not have a major impact on their capital requirements, according to the GSE regulator. The Office of Federal Housing Enterprise Oversight is working with the Financial Accounting Standards Board on changes to FAS 140, OFHEO Director James Lockhart told MortgageWire. The two government-sponsored enterprises already have a 45-basis-point capital charge on their guaranteed MBS, he noted. And investor concerns that an accounting change would trigger a dramatic rise in their capital requirements "makes no sense," Mr. Lockhart said. Wall Street stock investors dumped Fannie and Freddie shares on Monday on fears that the GSE might have to raise $75 billion in new capital due to accounting changes [see above item]. In an interview on CNBC-TV, Mr. Lockhart stressed that Fannie and Freddie are adequately capitalized and have raised $20 billion in new capital over the past seven months.