Fannie Mae (FNM) and Freddie Mac (FRE) will be allowed to increase their mortgage holdings to a maximum of $850 billion through the end of the year before their regulator requires them to eventually reduce their portfolios to $250 billion, under an interim final rule published Tuesday by their regulator.

The new requirements, issued by the Federal Housing Finance Agency, are in line with the agreements between the agency and the Treasury Department announced in September when the federal government took control of the two firms.

FHFA said in a statement that the two government-sponsored enterprises would be allowed to increase their mortgage holdings to $850 billion through Dec. 31 of this year. Beginning on Dec. 31, 2010, however, the two firms will have to reduce their mortgage portfolios by at least 10% annually until the assets reach $250 billion.

The rule is subject to a 120-day comment period. FHFA said it is seeking comment on how to govern Fannie and Freddie's investment portfolios when they are no longer under government controls, among other matters.

Separately, the FHFA issued an interim rule for measuring the capital levels at the 12 Federal Home Loan Banks. The agency said the rule will set the standard for whether a bank is considered to have adequate capital.

-By Michael R. Crittenden, of Dow Jones Newswires; 202-821-2159; michael.crittenden@dowjones.com.

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary. You can use this link on the day this article is published and the following day.