Monday, March 21, 2005

Fannie Mae Continues to Shrink Loan Portfolio, Trimmed It by Nearly 1.8 Percent in Feb.

Report: Fannie Mae Shrinks Loan Portfolio

WASHINGTON (AP) -- Mortgage giant Fannie Mae, whose accounting is under investigation by federal regulators, continues to shrink its loan portfolio at a robust clip and trimmed it by nearly 1.8 percent last month, a report released Monday by the company shows.

Fannie Mae, the largest U.S. buyer of home mortgages, recently was ordered by the Securities and Exchange Commission to restate its earnings back to 2001, a correction that could reach an estimated $11 billion. Another federal agency has given the government-sponsored company until Sept. 30 to boost its capital cushion against risk by 30 percent, or some $5 billion.

To make up the shortfall, Fannie Mae has recently reduced its portfolio of mortgage loans, raised fresh capital by issuing some $5 billion in preferred stock and slashed its first-quarter dividend payout by half, to 26 cents a share.

The company was a darling of Wall Street, marked by spectacular growth in recent years. Its accounting crisis became known last September, as regulators accused it of serious bookkeeping problems and manipulation of earnings to meet Wall Street targets.

Last week, Fannie Mae disclosed that it will miss the March 31 SEC deadline for filing its financial report for 2004 and that it was unable to provide "a reasonable estimate" of its earnings for 2003 and 2004. The discovery by regulators of falsified signatures on accounting ledgers raised the possibility of criminal activity by employees at the Washington-based company.

Fannie Mae reported Monday that its gross portfolio, which includes both its own investments and mortgage-backed securities it guarantees that are held by other investors, fell to some $875 billion at the end of February from $891 billion in January, for an annualized rate of around 20 percent.

Fannie Mae and Freddie Mac, its smaller rival, were created by Congress to pump money into the $8 trillion home-mortgage market. They buy and guarantee repayment of billions of dollars of home loans each year from banks and other lenders, then bundle them into securities that are resold to investors worldwide.


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