Fannie Mae, Freddie Mac shares tumble

NEW YORK, July 7 (UPI) -- Fannie Mae and Freddie Mac shares tumbled Monday as word circulated about proposed accounting-rule changes that could force them to raise billions of dollars.

Shares for both were off by more than 20 percent after a note from Lehman Brothers analysts said a pending Financial Accounting Standards Board rule change could result in the two needing to raise a total of $75 billion, MarketWatch.com reported.

The Lehman Brothers analysts also said they thought the two government-sponsored enterprises would be granted an exemption to the rule change.

"A literal interpretation of their minimum capital requirements would suggest that the GSEs would become significantly under-capitalized, and it would be very difficult for them to raise the capital needed," the analysts wrote.

Egan-Jones Ratings, an investor-supported ratings agency, said Freddie Mac has $7.2 billion in market capitalization, but probably at least $5 billion in capital to rebuild its base, MarketWatch said.

"As the mortgage market deteriorates, we expect more charge-offs," the agency said.