Fannie Mae's Shares Drop To $25.25 Following Announcement Of First Quarter Losses

Washington, DC (AHN) - It is not only American homeowners who are on the losing end of the U.S. housing slump. Even the nation's largest mortgage finance firm, Fannie Mae, suffered $2.2 billion losses for the first quarter of 2008.

To recover from its losses, Fannie Mae said it would sell new stock to raise $6 billion and reduce its dividends to 25 cents per share beginning on the third quarter, which is expected to generate $390 million annually.

But Ajay Rajadhyaksha, head of fixed-income strategy for Barclays Capital, forecast Fannie Mae's new capital may not be sufficient if the housing crisis goes through 2009. "Things in the housing and credit markets are deteriorating very fast and this will not be the last capital raising year," Rajadhyaksha explained to Bloomberg.

The company's losses were due to the sharp rise in delinquencies and substantial dips in home values. It is bracing for more mortgage defaults and home foreclosures in the coming months, Fannie Mae chief executive officer Daniel Mudd said in a statement.

In 2007, for the same quarter, Fannie Mae reported a profit of $961 million. Tuesday's report of losses translates to a $2.57 decline per share.

Following the announcement of Fannie Mae's first quarter loss, its shares went down by 11 percent to $25.25.