Fannie Mae May Have Financial Rating Cut by Moody's

Bloomberg reports:

Fannie Mae, the largest source of money for U.S. home loans, may have its bank financial strength rating cut by Moody's Investors Service because of a record $3.55 billion fourth-quarter loss.

The loss ``represents a significant deterioration of surplus regulatory capital'' from $3.9 billion in December, Moody's said in a statement today. Fannie Mae is likely to have ``sizable losses'' in the first half of 2008 and may have a net loss for the year.

Fannie Mae, which accounts for at least one in five home loans, is facing the toughest housing slump in a generation, Chief Executive Officer Daniel Mudd said yesterday, forecasting the market won't bottom until 2009. Regulators removed limits on the combined $1.5 trillion mortgage portfolios of Fannie Mae and Freddie Mac yesterday, enabling the companies to increase financing for the housing market.

While Moody's affirmed the Washington-based lender's top Aaa senior-debt rating with a stable outlook, it's reviewing the financial strength rating, which measures the odds of the company needing assistance from shareholders, the government or other external parties. That rating is at B+, the third highest grade.

No word yet from Barnie Frank(Democrat-Fannie Mae) or the rest of the Congress on the pad of Fannie Mae.