Lehman's Bruce Harting is the latest among Wall Street analysts to say that the government sponsored-enterprises (GSEs) have no immediate need for capital.

Shares of Fannie Mae and Freddie Mac (FRE.N) rose in morning trade Thursday, prompted by easing concerns about capital needs at the two mortgage finance GSEs, and Fannie's announcement of management changes to preserve capital and cut losses.

The stocks are at their highest levels since August 19, but are down more than 80 percent year-to-date.

The shares had plummeted amid fears the two companies did not have enough capital to sustain themselves as the U.S. housing market worsens and that a bailout would result in their common shares becoming worthless.

"While the recent price movement in the stocks impacts the cost and ability of the GSEs to raise new capital, neither company currently has a capital shortfall and both continue to do new business," Harting said.

Even if neither Fannie nor Freddie raises another dollar of capital over the next year, both companies would likely remain above their statutory minimum requirements, he said. He has an "overweight" rating on both the stocks.

On Wednesday, Merrill Lynch said it was premature to consider a recapitalization sponsored by the U.S Treasury for Fannie and Freddie, while earlier this week Citigroup had estimated that the two companies had enough capital to absorb probable losses through the end of the year.

Last month, the U.S. Treasury promised to re-finance Fannie Mae and Freddie Mac, if either were facing collapse.

Lehman's Harting expects Fannie to get through the 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," he said.

The analyst expects Fannie to have core capital of $42 billion by the fourth quarter plus another $14 billion of reserves.

He more than trebled his 2008 loss-per-share estimate on Fannie to $10.24 a share, and 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.

"But if the company was absorbing losses through the income statement as incurred, instead of front-end loading the excess reserves, the capital would be closer to 170 percent of the minimum capital requirement," Harting added.

The analyst cut his price target on the stock to $20 from $46.

Fannie Mae passed another test of investor confidence on Wednesday with the successful sale of $2 billion in short-term debt.

Shares of Fannie rose 7 percent to $6.96, while those of Freddie were up 9 percent at $5.19, in morning trade on the New York Stock Exchange, .

(Reporting by Ramya Dilip in Bangalore; Editing by Amitha Rajan)