Street Sees Rising Credit Costs Weighing On Fannie, Freddie
06/20 10:31 am (ON)
Story 0570 (FNM, FRE)
NEW YORK -(Dow Jones)- Home prices falling more than expected and rising credit costs will deepen losses at Fannie Mae (FNM) and Freddie Mac (FRE), Wall Street analysts said Friday.
Though Fannie Mae said last month it considered severe scenarios for home price declines and credit stress, UBS analyst Eric E. Wasserstrom said losses could be worse than the lender's forecasts and require it to raise even more capital than the $7 billion it raised recently.
Lehman Brothers analyst Bruce Harting said the housing market was continuing to deteriorate at an accelerating rate, and expected it to fall further than he previously believed, to 20% below its peak. Fannie's and Freddie's credit costs were rising as a result, Harting said.
Analyst Daniel Zimmerman of Goldman Sachs also raised a warning flag. "Credit costs continue to rapidly increase," he said, and called the lenders' guidance "overly optimistic."
All three analysts cut their earnings expectations for Fannie and Freddie, with UBS' Wasserstrom slashing his full-year estimate for Fannie Mae to a loss of $3.75 a share. He had seen a loss of just 25 cents a share. Lehman widened its loss expectation for Fannie to $3.13 a share and for Freddie to $2.20 a share; Goldman pushed its loss estimate for Fannie down to $4 a share and for Freddie to $2.70 a share.
Fannie Mae shares traded down 3.2% to $24.20 in recent trading, while shares of Freddie fell 4.4% to $22.60.
-By Ed Welsch, Dow Jones Newswires; 201 -938 -5244; edward.welsch@dowjones.com
(END) Dow Jones Newswires
06 -20 -08 1031ET