Last week Fannie Mae's board of directors said that it agreed to increase its capital reserves to maintain a 30% target surplus over the regulatory minimum as per the request of its regulatory body, the Office of Federal Housing Enterprise Oversight (OFHEO). The reserve ratio is similar to the agreement Freddie Mac had with the regulator during its earlier restatement.
Analysts said that the GSE's existing capital levels are not enough to support the asset base and reach the 30% surplus required by OFHEO. However, the GSE was given nine months to achieve the level. Merrill Lynch estimates Fannie Mae's capital deficit to be roughly $3.7 billion.