Fannie Mae and Freddie Mac Seek to Preserve Capital

Washington Post (03/03/08) P. D4; Hilzenrath, David S.
Fannie Mae and Freddie Mac are built on a federal mission to stabilize the mortgage markets, but the top executives of the government-sponsored financial institutions said last week that their main focus is to protect the capital of the companies. Fannie Mae and Freddie Mac have lost billions of dollars as defaults have risen and home prices have fallen; and late last year, the companies moved to reduce the dividends paid to shareholders and to sell billions of dollars of preferred stock that could potentially undercut beleaguered holders of their common stock. A year ago, the companies said they could help struggling homeowners if the caps on their mortgage purchase volumes were lifted. Those limits were lifted as of March 1; but Walter Schmidt, a mortgage analyst with FTN Financial Capital Markets, believes the companies would be in a better position to fulfill their historic roles if the government also relaxed the requirement that they keep an extra 30 percent in capital.