OFHEO has formally agreed to loosen capital requirements on Fannie Mae and Freddie Mac in a move the agency expects to provide up to $200 billion in immediate liquidity to the MBS market. OFHEO estimates that combined with existing capabilities, the new initiative should allow the government-sponsored enterprises to purchase or guarantee about $2 trillion in mortgages this year. Under the plan, OFHEO is reducing its 30% capital surplus requirement on Fannie Mae and Freddie Mac to 20%. OFHEO said it will consider further reductions in the future. The deal requires the GSEs to raise additional capital as well.
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