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Thursday, May 8th, 2008 Subscribe To Our Feed

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NYT says: As home prices continue their free fall and banks shy away from lending, Washington officials have increasingly relied on two giant mortgage companies — Fannie Mae and Freddie Mac — to keep the housing market afloat.
But with mortgage defaults and foreclosures rising, Bush administration officials, regulators and lawmakers are nervously asking whether these two companies, would-be saviors of the housing market, will soon need saving themselves.
Analysts surveyed by Thomson Financial exepected a loss of 81 cents a share in the latest period.
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The company also announced that it planned to raise $6 billion in capital through an equity offering. Fannie Mae and Freddie Mac, which were created by Congress but are owned by investors, suffered more than $9 billion in mortgage-related losses last year, and analysts expect those losses to grow this year. Freddie Mac is to report earnings next week.
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If either company stumbled, the mortgage business could lose its only lubricant, potentially causing the housing market to plummet and the credit markets to freeze up completely.
Concerns over the companies’ finances had prompted a fierce behind-the-scenes battle between nervous government officials and the two companies. The regulator, the Office of Federal Housing Enterprise Oversight, said it intended to reduce the capital surplus requirement after the company raised more capital. More Capital Sought
Lawmakers are pushing to rein in the companies with new legislation. The companies say such criticisms are without merit. The companies also say that they have not demanded anything. Fannie and Freddie do not lend directly to home buyers. The companies were forced to replace top executives, pay hundreds of millions in penalties and consent to strict growth limits.
Freddie Mac fell to $17.39 on March 10 from $24.49 on Feb. 28, while Fannie Mae declined to $19.81 on March 10 from $27.90 on Feb. 28.
Despite those troubles, lawmakers had few alternatives to asking Fannie and Freddie to buy more and riskier mortgages.
In March, the companies agreed to raise more capital within the year. Last month, the companies promised to pump money into the more expensive reaches of the housing market. Each time Congress or regulators have given the companies new room for growth, their stock prices have risen. But so far the companies have balked at raising more capital. In a March meeting, Freddie Mac’s chairman, Richard F. Syron, bolstered those fears by saying the company would put shareholders’ interests first. Michael L. Cosgrove, a spokesman for Freddie Mac, said Mr. Syron was committed to both satisfying the company’s public mission and creating shareholder value. A report released earlier this month by Mr. Lockhart, the regulator, noted that although Freddie and Fannie had a combined $19.9 billion of “unrealized losses” on mortgage-related investments, neither company had reduced its earnings to reflect those declines. Fannie Mae declined to discuss unrealized losses. Mr. Cosgrove, the Freddie Mac spokesman, said the company discloses all financial choices and downgrades all potentially impaired securities when appropriate.
Now, some overdue loans can go two years before the companies record a loss.
Fannie Mae declined to discuss the accounting of impaired loans. The company stemmed the decline by selling $6 billion in preferred stock.