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July 11, 2008
Mortgage Giants Take Beating on Fears Over Loan Defaults
Fannie Mae and Freddie Mac watched their share prices fall to more than 14-year lows on July 7, as investors remain concerned about the government-sponsored enterprises' ability to meet capital requirements and the jump in borrowing costs and decline in home prices that would result. Investors worry that Fannie Mae and Freddie Mac's stock will be worthless if they are forced to issue billions in stock to offset mortgage-related losses. Experts note that the GSEs have purchased insurance to safeguard against rising mortgage defaults, but losses registered by these insurers could make it mandatory that Fannie Mae and Freddie Mac reserve more capital to cover losses.
Posted by S. Germain at July 11, 2008 08:04 AM