The nation's GSE regulator wants more information about the Federal Home Loan Bank of Seattle's capital restoration plan before it lifts the bank's "undercapitalized" designation.

The Federal Housing Finance Agency (FHFA) is giving the Seattle bank 120 days to develop and submit the requested material.

"During this period, FHFA will maintain the Bank's 'undercapitalized' classification absent further developments, and the accompanying restrictions will remain in place," said the GSE regulator.

Under the restrictions, the Federal Home Loan Bank cannot pay dividends to member institutions or redeem or repurchase member stock. FHFA reaffirmed the Seattle bank's 'undercapitalized' status in November 2009 even though the FHLB met all statutory and regulatory minimum capital requirements in the third quarter.

Acting director Edward DeMarco noted the institution's earnings have been hurt by its investments in private-label MBS and expects those losses could continue. The Seattle FHLB reported a $162 million loss in the fourth quarter.

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