Fannie Mae is on track to meet its September deadline to reach the 30% capital surcharge set by the Office of Federal Housing Enterprise Oversight, UBS analysts said in a report released last week. This is why concerns about a massive portfolio selling by Fannie are "misplaced," analysts added.

Estimating the extent to which Fannie Mae needs to decrease its portfolio between now and the GSE's September deadline, the 30% capital surcharge will be equal to $9.29 billion with the effective capital charge at 3.25%. The GSE has a $4.04 billion capital surplus and will be internally accumulating an additional $1.7 billion per quarter or $3.4 billion for the next two quarters, leaving a $1.85 billion capital deficit. In April, Fannie Mae reduced its portfolio size by roughly $12.5 billion, leaving under $45 billion in necessary reductions, out of the $57 billion it needed to shed as of the end of March. In order to achieve this, Fannie will have to reduce its portfolio an average of $9 billion per month, which is less than the $13 billion a month that Fannie shrunk in the first four months of the year.

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