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Non-Tech : Fannie Mae Forum

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From: mlkr	9/2/2008 3:35:43 PM
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FITCH's rating changes on FNM and FRE! 10:16AM Fitch lowers Fannie Mae & Freddie Mac's Pfd Stock to 'BBB-' ; affirms 'AAA' IDR & 'AA-' Sub Debt : Fitch downgraded the preferred stock ratings of Fannie Mae (FNM) and Freddie Mac (FRE) as follows: FNM Preferred stock to 'BBB-' from 'A+'. FRE Preferred stock to 'BBB-' from 'A'. The preferred stock rating for FNM and FRE also remain on Rating Watch Negative by Fitch. Fitch has also affirmed and removed Freddie Mac's 'AA-' subordinated debt from Rating Watch Negative. Additionally, Fitch has affirmed the 'AAA' long-term Issuer Default Ratings of both government sponsored entities. Today's rating action follows an evaluation of FNM and FRE's capital adequacy and potential support from the US Treasury. While Fitch believes capital at both firms remains adequate for the intermediate term, the capital markets have significantly discounted the value of both common and preferred stocks, effectively limiting any potential issuance from either GSE. The lack of reliable access to the public equity markets appears to be more permanent than Fitch had anticipated. Prior ratings expected that further losses may be significant enough to warrant additional capital raises. It now appears that FNM and FRE's ability to access equity markets may need to be precipitated or replaced by more tangible forms of government support. Current levels of capital are sufficient to absorb losses embedded in single family portfolios but dividend cessation for the preferred stock becomes more likely as FNM and FRE may need to resort to other means of capital preservation in advance of or in tandem with government support. Profitability and expected losses from the institutions are expected to vary as indicated by differences in serious delinquency rates and credit costs at second-quarter 2008 reflecting different characteristics between guaranteed and retained portfolios. However, Fitch believes any government action would be taken in tandem, rendering ratings distinctions meaningless. source: briefing.com

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