Nov 16, 2007 9:57 am US/Central
Analysts Worry Fannie Mae Hides Credit Losses
WASHINGTON (CBS) ―
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Fannie Mae is the country's largest source of home mortgage funds for low- and moderate-income families. (File)
CBS
Fannie Mae executives on Friday defended a change in the way the mortgage lender discloses losses on home loans amid concern from analysts that it could mask the true impact of the credit crisis on its bottom line.
The chief financial officer and other executives of the government-sponsored company, which reported a $1.4 billion third-quarter loss last week, held a conference call with Wall Street analysts to explain the recent change.
Analysts peppered the executives with questions in a skeptical tone. The way Fannie discloses its mortgage losses, addressed in an article published online by Fortune, raises extra concern among analysts given that Fannie Mae was racked by a $6.3 billion accounting scandal in 2004 that tarnished its reputation and brought government sanctions against it.
Moreover, the skepticism from Wall Street comes as Fannie seeks approval from the government to raise the cap of its investment portfolio.
The chief financial officer, Stephen Swad, said in the call that some of the $670 million in provisions for credit losses on soured home loans that Fannie Mae wrote off in the third quarter likely would be recovered.
"We book what we book under (generally accepted accounting principles) and we provide this disclosure to help you understand it," Swad said.
Shares of Fannie Mae fell $4.30, or 10 percent, to $38.74 on Friday, following a 10 percent drop the day before.
Fannie Mae is the country's largest source of home mortgage funds for low- and moderate-income families, according to the Urban Institute, a non-partisan economic and social research policy center.
(© 2010 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
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