(by Peter Van Bruggen)

On Monday, Fannie Mae, the U.S. largest government-ruled mortgage organisation, agreed to meet regulator’s demand and restate its results as well as modify its accounting practices and lift capital reserve to 30% above the required minimum.

This is the first time Fannie Mae agreed for such changes as they are sure to decrease its profitability and the prospects of growth.

The agreement generally aimed at limiting of Fannie Mae’s explosive activity and involves interests of Bush administration and the U.S. Federal Reserve. The problem appeared when the company lifted its mortgage holdings to $895 billion past decade, fivefold as compared with the previous one.

Fannie Mae is now nation one of the biggest financial institutions, its assets account for $1 trillion. Company’s $940 billion of debt is held in world’s biggest banks. Fannie Mae and its sibling Freddy 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% already.

Under the terms, Fannie Mae must hold at least 30% more capital than its ordinary minimum requirement within nine months. According to Fannie’s latest financial results, OFHEO minimum capital requirement is now reaches $9 billion. That will definitely lead to the company increase its capital to $5 billion from prior estimated $4 billion, specialists say.