Late yesterday, Fannie Mae reported 1% growth in its retained portfolio to $721.6 billion in February, improved from negative 4.8% in January. Year-to-date, the portfolio's growth has been negative 2.0%. Earlier this morning, Freddie Mac said its retained portfolio contracted 12.4% in February to $709.5 billion. Year-to-date, its portfolio has shrunk 9.4%. Fannie Mae's modest growth came from a $4.2 billion increase in mortgage loan holdings. Fannie Mae holdings declined $3.1 billion, while non-Fannie Mae MBS holdings stayed almost the same. Freddie Mac's contraction was largely a result of nearly a $7 billion decline in Freddie Mac holdings and a $3.7 billion decline in non-Freddie Mac non-agency holdings. Meanwhile, mortgage loan holdings rose $3.6 billion. Total Fannie Mae MBS issuances were $69.4 billion in February, up from $49.1 billion in January. After liquidations, the net increase was $42.4 billion compared to $23.2 billion previously. Freddie Mac reported guaranteed PCs and structured securities issued totaled just under $43 billion, up from $29.5 billion in January. After liquidations, the net increase was $21.6 billion versus $11.4 billion previously. With the recent reduction in the capital surcharge from 30% to 20%, the market is anticipating some amount of growth in both GSEs' retained portfolios. Lehman Brothers analysts estimated this week that the reduction of the capital surcharge and potential additional capital raised could increase the amount of aggregate surplus capital to $19 billion. But given credit losses and a growing guaranty business, analysts estimated only around $4 billion of this being used for retained portfolio growth. JPMorgan Securities analysts, meanwhile, said that under the 20% capital requirement they do not really see an increase in the capital available to grow the retained portfolio at this time.