According to Harting, Fannie Mae should make it through this difficult housing cycle with core capital remaining at or above the 15 percent excess capital requirement.
"In the event that conditions worsen beyond our forecast, the regulator could lower the excess requirement further, such that the "minimum requirement" again becomes the binding constraint," Harting said.
Harting, who more than trebled his 2008 loss-per-share estimate on Fannie to $10.24 a share, said he expected provisions of $10.8 billion at Fannie during the second half of the year -- with charge-offs of $5.4 billion -- building reserves to $14.4 billion.
Further, he said he expected Fannie to have core capital of $42 billion by the fourth quarter plus another $14 billion of reserves.
The analyst slashed his price target on the stock to $20 from $46. Fannie Mae shares closed at $6.48 yesterday on the New York Exchange.