Fannie Mae, Freddie Mac shares climb

AP
Fannie Mae, Freddie Mac shares climb
Tuesday August 26, 1:51 pm ET
By Marcy Gordon, AP Business Writer

Fannie Mae, Freddie Mac shares climb for second day amid optimism over financial future

WASHINGTON (AP) -- Shares of Fannie Mae and Freddie Mac climbed for a second day Tuesday amid expectations in some Wall Street quarters that the mortgage finance giants will be able to weather the housing storm without a government rescue.

Fannie shares rose 43 cents, or 8.3 percent, to $5.62 in afternoon trading, while Freddie advanced57 cents, or 17.3 percent, to $3.86.

A new government report indicating the housing market might be stabilizing appeared to give some lift to Wall Street. The Dow Jones industrial average rose 5.53 to 11,391.78, and broader indexes were mixed. The Standard & Poor's 500 index rose 2.22 to 1,269.06, while the Nasdaq composite dipped 2.51 to 2,363.08.

The Commerce Department reported that new home sales rose in July, but still fell short of economists' expectations, and home prices continued to sink.

McLean, Va.-based Freddie Mac completed a $2 billion debt sale on Monday, and a Wall Street analyst said the two government-sponsored companies have an adequate capital cushion to absorb billions of dollars in losses from soured mortgages in the near term, meaning a federal bailout could be avoided.

"While press reports have made clear that (Freddie) is having little success raising private capital, it does not seem to be having any difficulty attracting investors in" its debt, Barclays Capital analysts wrote in a research note Tuesday.

Other analysts, however, continue to express a gloomier outlook.

Washington-based Fannie Mae reported Tuesday that the portfolio of mortgages it holds on its books grew to $758.1 billion in July from $749.6 billion in June, and $729.8 billion in July 2007. Freddie said its portfolio increased to $798.2 billion in July from $791.8 billion in June, and $720.6 billion in July 2007.

Freddie reported that delinquencies on single-family mortgages held on its books rose in July to 1.01 percent of the $2.21 trillion in mortgages it owns or guarantees. That was up from 0.93 percent in June, and 0.44 percent in July 2007.

Fannie didn't provide comparable delinquency data for July, but June's single-family delinquencies rose to 1.36 percent of the $3.04 trillion in mortgages the company backs or holds for investment, up from 1.3 percent a month earlier.

Concern also has been growing that a government rescue of Fannie and Freddie -- whose share prices have plunged in recent weeks -- could be costly for scores of investment, banking and insurance companies that hold billions of dollars in their preferred shares.

The two companies had nearly $36 billion in preferred shares outstanding as of June 30, according to filings with the Securities and Exchange Commission.

In the coming weeks, Wall Street will be closely watching the results of several debt auctions by the two companies.

Freddie's next long-term debt sale, typically five-year notes, is scheduled for Sept. 2. The company also has a sale of one-month notes set for Wednesday, and of three- to six-month bills for Sept. 22.

Fannie's calendar describes three- to six-month bill sales as weekly but doesn't provide a date; it says one-year bills are sold monthly. Its next long-term debt sale of two- to 10-year notes is scheduled for Sept. 8.