Another company on the losing end throws in the towel.
WASHINGTON — Fannie Mae (FNM) Chief Executive Officer Daniel Mudd Friday said the country’s housing turmoil is not expected to abate until at least late 2009, foreseeing more pain for homeowners, builders, and investors for another two years.
“This is the worst housing and mortgage market in recent memory, and we are still working our way to the bottom, in our view,” Mudd said at a shareholder meeting. “Housing starts are down. We expect further declines.
“Homes sales are down and we expect more to come. Home prices are down, and we expect them to continue to move down.”
Mudd said he didn’t expect to see housing and mortgage market growth until “the end of 2009, at the earliest.”
Fannie Mae is a government-chartered enterprise that purchases loans on the secondary market. Some of these loans are held in Fannie Mae’s portfolio, and others are packaged into securities and either held or sold.
Mudd acknowledged that the housing and credit market turmoil has challenged the firm, as Fannie Mae had to issue $7 billion in preferred stock and cut its dividend starting next year from 50 cents to 35 cents.
“These are both extraordinary steps, but steps that we believe are prudent in light of the extraordinary market conditions that I described,” Mudd said. “We have to have a solid and conservative capital cushion going into a market that is this challenging.”
The shareholder meeting was the company’s first in more than three years, as Fannie Mae is close to emerging from a sizable accounting scandal. Mudd said the company was on track to return to filing timely financial reports in February for its end-of-year 2007 report.
Like other financial companies, Fannie Mae’s stock price has been hit hard this year. The company mostly buys prime, fixed-rate mortgages and securities, but it does hold private-label securities backed by triple-A tranches of some subprime loans, in part to support its affordable housing requirements.
Mudd described Fannie Mae as “a solid company but in a tough cycle going into “08 with a good book of business.”
