March 20, 2008 / 4:03 PM / 10 years ago

UPDATE 1-KBW raises Fannie, Freddie to outperform

(Recasts; adds details, share movement)

March 20 (Reuters) - Keefe, Bruyette & Woods upgraded both Fannie Mae FNM.N and Freddie Mac FRE.N to “outperform” from “market perform,” saying recent government actions will help the companies in stabilizing the mortgage markets.

The decision by federal regulators to immediately reduce the 30 percent mandated excess capital requirement to 20 percent should enable the government-sponsored enterprises to support mortgage liquidity, KBW said.

Regulators on Wednesday eased capital requirements for the two firms to provide up to $200 billion in immediate liquidity for stressed mortgage markets.

The brokerage raised its price target on the shares of Freddie Mac to $46 from $22 and Fannie Mae to $48 from $32.

Fannie Mae shares were up more than 14 percent at $35.16, while Freddie Mac shares were up almost 11 percent at $33.16 in midday trade on the New York Stock Exchange. Both stocks have lost more than 40 percent of their value in the last 12 months. (Reporting by Sweta Singh; Editing by Himani Sarkar)

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