from CFZ post by mishadlo
Fannie Mae's Loss Risk Is Larger, Computer Models Show
By ALEX BERENSON
nytimes.com
Fannie Mae, the giant mortgage finance company, faces much bigger losses from interest rate swings than it has publicly disclosed, according to computer models used by the company to estimate the value of its assets and debts.
At the end of last year, the models showed that Fannie Mae's portfolio would have lost $7.5 billion in value if interest rates rose immediately by 1.5 percentage points, internal company documents provided to The New York Times indicated. At that time, the market value of all the assets on Fannie Mae's books, minus all the company's debts, was about $15 billion. So it would have lost nearly half its market value from such a sharp increase in interest rates, according to the models.
[...]
The models were provided to The Times by a former Fannie Mae employee, in return for assurance that he not be identified.
The company's chairman, Franklin D. Raines, responding to a question at a news conference last week, said Fannie Mae did not depend on the market value of its portfolio to judge the success of its business. Asked whether Fannie Mae constructed such estimates weekly, he did not reply.
In interviews yesterday, executives at Fannie Mae acknowledged that the company estimates the value of its portfolio weekly, though it discloses such information to investors only once a year. The models provided to The Times are several months old, the executives said, and present an incomplete and misleading view of Fannie Mae's finances. They added that Fannie Mae hedges its risks properly and discloses them fully to investors.
"There is no reason for anybody to be worried about the company," said Peter Niculescu, Fannie Mae's executive vice president for the mortgage portfolio. "We are very happy, comfortable, and proud of our performance this year in what has turned out to be a very volatile interest rate environment."
Mr. Niculescu declined to say whether Fannie Mae's portfolio had gained or lost value this year. |
