On December 22, the Federal Housing Finance Agency (FHFA) adopted a final rule for Fannie Mae and Freddie Mac (the Enterprises) pertaining to portfolio holdings. The final rule implements section 1109 of the Housing and Economic Recovery Act of 2008 (HERA) and adopts without change FHFA’s interim final rule on portfolio holdings, which was effective January 30, 2009. The final rule establishes, as the standard for the Enterprises’ portfolio holdings, the criteria set forth in the Senior Preferred Stock Purchase Agreements (PSPAs), which specified that each Enterprise may hold mortgage assets up to $900 billion as of December 31, 2009. Under the final rule, for each subsequent year starting December 31, 2010, each Enterprise is required to reduce its maximum holdings of mortgage assets by 10% of the maximum limit in the preceding year until the limit reaches $250 billion. At that point, no further reduction in the maximum limit is “currently” required.