Fannie Mae Loses $2.3 billion in Q2
US mortgage giant posts big second quarter loss on higher credit losses.
With losses chewing through precious capital, the firm is taking action to stanch the bleeding. It is reducing its stock dividend to $0.05 per share from $0.35, cutting operating costs by 10% by the end of next year, increasing guarantee fees (including a 25-basis-point adverse market delivery charge), eliminating new Alt-A business, and exhibiting caution regarding portfolio growth. The firm has raised its credit loss guidance for this year to 23-26 basis points from 13-17 basis points previously. Fannie also indicated that credit loss trends accelerated to the downside in July, the first month of the third quarter. We continue to advise extreme caution for anyone considering speculating in Fannie Mae shares.