Employee Stock Option Plan Assets Of Fannie Mae, Freddie Mac Workers Shrink

Washington, D.C. (AHN) - It is not only the two largest mortgage lenders in the U.S. which took a beating financially after the subprime mortgage crisis blew up almost a year ago. The assets of the employee stock ownership plan of Fannie Mae and Freddie Mac also shrank.

From $116 million at the end of 2006, the assets of Fannie Mae workers tumbled down to $17.5 million only.

Stock option was one of the rewards of Fannie and Freddie employees and officials during their heydays. Richard Syron of Freddie Mac earned $18.3 million in 2007, two-thirds as stocks and options, Fannie Mae's Daniel Mudd made $11.6 million, majority as stock.

Midlevel staff also got their salaries partially in stock and options, approximately equivalent to one-fifths of their total compensation.

As Fannie and Freddie struggled to remain financially afloat when the housing crisis erupted, the value of their employees' ESOP dipped to 75 percent of its original value. At different periods, the two mortgage lenders temporarily banned their workers from disposing their shares in the ESOP.

With the turnaround of Fannie since last week, the company's shares continue to climb Thursday up for the sixth day at the New York trading. It is the longest streak since May 2007, and an aftermath of executive replacements.

Chief Financial Officer Stephen Swad will be replaced by Controller David Hisey, Peter Niculesco will assume responsibility of Chief Business Officer from Robert Levin and Risk Management head Enrico Dallavecchia will exit, but his replacement has not been named yet.

Fannie shares went up 7.4 percent by $0.48 to $6.96 at 9:38 a.m. of Thursday morning at the New York Stock Exchange composite trading. Similarly, Freddie Mac stocks also climbed $0.44 or 9.2 percent to $5.19.

Despite the start of a recovery for Fannie, analysts said the focus will return to a capital hike for the largest mortgage lender. Ajay Rajadhyaksha, head of fixed-income strategy at Barclay's Capital, explained to Bloomberg, "Investors care most about whether there's clarity on a Treasury injection or not and under what terms that would happen. Until that happens, we remain in limbo."