Wednesday March 19, 01:41 PM
Fannie Mae, Freddie Mac jump in premarket on OFHEO initiative to boost liquidity
NEW YORK (Thomson Financial) - Shares of Fannie Mae (NYSE: FNM - news) and Freddie Mac (NYSE: FRE - news) rallied in premarket trading Wednesday after the the companies and the Office of the Federal Housing Enterprise Oversight, which oversees the government sponsored enterprises, agreed on a plan to make up to $200 billion worth of additional capital available for mortgage financing.
Fannie Mae climbed 4.4% to $29.45 and Freddie Mac hiked up 6.8% to $27.80 ahead of the open. The stocks had surged 27% and 26%, respectively, on Tuesday amid media reports that the GSEs and the OFHEO were working on an agreement.
As part of the agreement, the minimum capital requirement for the GSEs was lowered to 20% from 30%, and further reductions will be considered in the future. The OFHEO said it would permit a 'significant' portion of the 30% capital surplus to be invested in mortgages and mortgage-backed securities, and the GSEs said they would begin the process to 'raise significant capital' to support this initiative.
Tomi Kilgore
tk1
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