(by Geck Finn)

Fannie Mae’s regulatory capital may fall below the requirements of federal minimum, specialists say. That can cause new investments or its assets to be sold, they add.

The Office of Federal Housing Enterprise Oversight (OFHEO), Fannie Mae’s major regulator, declined to comment on company’s possible capital fall, but it is well clear the figures may exceed $4 billion, analysts say. Fannie Mae and another government-sponsored company Freddie Mac own or guarantee nearly half the $7,000bn market for US mortgages. Freddie Mac unveiled the understating of its earnings last year, making OFHEO boost its minimum capital requirement by 30%, so that it is quite possible for Fannie Mae to face the same requirement.

Fannie Mae’s deferred losses in question fell in the first half of 2004 because of interest rate hikes. Still, Fannie Mae faces large possibility of being undercapitalized as its losses were big.

OFHEO in its recent noted Fannie Mae’s accounting problem and ordered the company to take remedial measures.