Posted on May 7th, 2008 in Daily Mortgage/Housing News - The Real Story
Yesterday, everyone was writing about Fannie so I left it alone. There is not much more to add, so let me summarize.
- –Loss of $2.2 BILLION, which slightly less than FOUR TIMES greater than expected
- $51 BILLION in Subprime exposure
- $345 BILLION in Alt-A exposure
- Cut dividend and issued $6 BILLION of debt to raise capital without telling anyone how much they had to pay for said debt
- Moody’s downgraded Fannie’s strength one level to ‘B’ and sees a possible $9 BILLION loss in 2008-2009
- Warns the housing ‘slump’ will persist into next year
FANNIE MAE STOCK RALLIED 15% from the opening lows on this news due to:
- News OFHEO will loosen capital requirements on Fannie
- Fannie said they will take advantage of this downturn to book quality business that will actually be profitable some time in the future.
- Barney Frank’s proposed $300 BILLION bailout, which requires banks to reduce mortgage notes to 85% loan to value looks to have much support
There ya go. Fannie is having serious trouble as they stated. But, all it takes is OFHEO to allow them to leverage up more and Barney Frank to come in with yet another bailout and the stock rallies 15%. I am not short Fannie Mae (right now), but dislocations in financial markets that are this obvious and this extreme rarely end positively for stocks. Well, that’s unless you are short. -Best, Mr Mortgage