Fannie Mae Cutting Dividend, Selling Stock

The AP reports:

Mortgage finance giant Fannie Mae on Tuesday announced it was cutting its dividend 30 percent and selling $7 billion in special stock to raise additional capital.

The government-sponsored company said it was slicing its dividend to 35 cents a share, starting in the first quarter of next year, and issuing $7 billion in preferred stock this month to cushion against losses in lower-quality mortgages.

The stock sale "will provide the company with additional capital to conservatively manage increased risk in the housing and credit markets, help meet its mission of providing affordability, liquidity and stability, and free up capital to pursue emerging growth opportunities," Fannie Mae said in a statement.

The action follows similar moves recently by Freddie Mac, its smaller government-sponsored rival in the $11 trillion home-mortgage market, which posted a $2 billion loss in the third quarter.