UPDATE 2-Fannie, Freddie 'adequately' capitalized - OFHEO

(Changes headline, recasts lead, adds rising capital requirements)

NEW YORK, March 11 (Reuters) - Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research), the biggest providers of money for U.S. home mortgages, had adequate capital at the end of December to weather deteriorating market conditions, their federal regulator said on Tuesday.

Fannie Mae had core capital of $45.4 billion, or $3.9 billion more than the minimum required, the Office of Federal Housing Enterprise Oversight said in a statement. Freddie Mac's core capital of $37.9 billion was $3.5 billion over its minimum, OFHEO said in a statement.

Both government-sponsored enterprises increased capital over the quarter in moves seen "prudent" given market conditions, OFHEO added.

In the wake of accounting scandals, OFHEO ordered the GSEs to hold a capital cushion 30 percent larger than the minimum required to protect against possible losses. The mandated capital levels rose for both companies due to higher costs of preferred stock they issued to raise capital and rising credit losses, OFHEO said.

Fannie Mae and Freddie Mac have pushed the regulator to grant them relief from that capital surcharge so that they can make larger investments in the now-roiling mortgage market.

OFHEO said it is contemplating "the gradual decreasing" of that surcharge if the companies meet certain safety and soundness conditions. (Reporting by Al Yoon; Editing by James Dalgleish)