Despite Fannie's declining financials – this is the fourthconsecutive quarterly loss for the GSE – its net loss for Q2 stillsurpassed the range the Street had been expecting: namely a lossbetween 68 cents a share to 97 cents per share. The news, notsurprisingly, set Fannie Mae's shares plummeting Friday morning bynearly 20% at one point, reaching $8.13 per share.

Fannie is developing a track record of larger than expectedlosses, Frederic Ruffy, the senior options strategist, a New York City-based provider of options marketanalysis, tells "In the previous two quarters, thecompany missed badly. Last quarter, Fannie lost $2.57 per share,compared to analyst estimates for a loss of 81 cents. It suffered aloss of $3.80 per share before that, well below analyst estimatesof -$1.24."

Fannie Mae has said it will cut its dividend 86%, to 5 cents ashare, from 35 cents a share. It will also slash operating costs by10%. It blamed its Q2 performance on an increase in the provisionfor credit losses that more than offset higher revenue and fairvalue gains. "Volatility and disruptions in the capital marketsbecame even more pronounced in July, CEO and president Daniel Muddsaid in a prepared statement. "In addition, credit performance hascontinued to deteriorate and, based on our experience in July, weanticipate further increases in our combined loss reserves. Giventhis volatility and the build-up of our reserve, as well as theuncertainties inherent in the US economy and the housing market, weare taking a series of additional actions that reflect our ongoingfocus on conserving and enhancing our capital, as well as managingour credit risk through the balance of this cycle."

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Erika Morphy

Erika Morphy has been writing about commercial real estate at for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.