How and when is a GSE’s Minimum Capital requirement determined?

OFHEO determines and publishes the GSEs’ minimum capital requirements on a quarterly basis. The OFHEO Director has the discretion to determine the capital classifications of the GSEs at anytime. The components of minimum capital are defined by regulation. Please see the OFHEO Capital and Subordinated Debt page of the OFHEO web site for more information under “ Minimum Capital ”, and please review 12 CFR 1750 .


Is AOCI included in the Minimum Capital calculations?

No. Accumulated Other Comprehensive Income (AOCI) is not currently included in the statutory definition of core capital. While this practice is similar to other financial regulators, OFHEO is currently researching ways to enhance the definition of core capital through regulation that more accurately reflects current GAAP practices.

Why do both GSEs need to maintain 30% of the required capital in excess of the statutory minimum capital requirement?

Freddie Mac has been required to maintain the 30% surplus since a letter of agreement was established by OFHEO on January 28, 2004 due to operating risk exposure, and increasing deficiencies in internal controls, systems and accounting.

Fannie Mae has been required to maintain the 30% surplus since a   Formal Agreement was issued by OFHEO on September 27, 2004 . The present guidance for the 30% requirement is within a subsequent, formal documented, the May 23, 2006 Consent Order due to operating risk exposure, and increasing deficiencies in internal controls, systems and accounting.

OFHEO will evaluate each situation independently and determine how best to communicate the results. OFHEO has the latitude to reaffirm, reclassify, or simply to not change the prior periods’ capital classification. Resubmitted results are typically posted to the historical website chart following OFHEO’s internal review and analysis of the results.

If I have a question about Minimum Capital but can not locate the answer on the OFHEO web site, how do I submit my question?

Because minimum capital, critical capital and risk-based capital are part of a quarterly public reporting process, OFHEO has an e-mail address for all capital-related questions: rbcquestions@ofheo.gov . Please include your name and affiliation.  All responses will be provided in writing, as soon as possible.