Capital Prior to Conservatorship

Minimum capital is a leverage ratio defined in statute that constitutes a base level of capital considered prudent to maintain safety and soundness. The statutory minimum capital level is defined as: 2.5% of aggregate on-balance sheet assets, and 0.45% of off-balance sheet obligations (12 USC 4612). The definition of core capital is at 12 USC 4502(4). Currently both Enterprises maintain a capital surplus over the statutory minimum capital requirement. Please see "OFHEO-Directed Minimum Capital Requirements" section below.

Critical capital is a leverage ratio defined in statute. Enterprises that fall below the critical capital level are critically undercapitalized and would normally result in the appointment of a conservator. Core capital is defined at 12 USC 4613.

By statute and regulation, OFHEO’s risk-based capital stress test is defined as a cash flow stress test that determines the amount of total capital for the Enterprise that is sufficient to maintain positive capital during a 10-year defined stress period. This is met with total capital as defined in 12 USC 4502(17).

The effective dates of the OFHEO-directed requirements are noted in the respective documents hyperlinked from other locations within FHFA's web site.

FREDDIE MAC:

• 20 percent 
• 30 percent 

FANNIE MAE:

• 15 percent 
• 20 percent 
• 30 percent 

On a quarterly basis, OFHEO is required by statute to classify the Enterprises' capital and disclose those results. See prior periods' capital classification news releases. OFHEO achieves this requirement through appropriate correspondence with the Enterprises on both a proposed classification and a final classification, following a response period from the Enterprises, as required by statute. Simultaneous to the final classification, OFHEO also sends appropriate notice of the classification to appropriate U.S. Senate and House of Representative members. A public disclosure of the quantitative positions, as well as the capital adequacy conclusion, is also made. OFHEO provides a history of the capital positions on its web site for public reference. OFHEO does not provide public disclosure of the various qualitative assessment criteria or other proprietary information in its quarterly public release.