Fannie Mae to raise $6 billion, cuts quarterly dividend

By Lisa Kerner

Charlotte, N.C., May 6 - Fannie Mae announced plans to raise $6 billion in new capital through public offerings of common stock, non-cumulative mandatory convertible preferred stock and non-cumulative, non-convertible preferred stock.

The new capital will enable Fannie Mae "to maintain a strong, conservative balance sheet, enhance long-term shareholder value, and provide stability to the secondary mortgage market," according to a company news release.

Fannie Mae's board of directors said it intends to reduce the company's quarterly common stock dividend to $0.25 per share beginning with the third quarter of 2008. The move will make available some $390 million of capital annually, the release said.

The company also announced a series of new initiatives known as "Keys to Recovery" designed to provide "liquidity, stability and affordability to the housing and mortgage markets for the long term."

Keys to Recovery include new financing options and partnerships with the state Housing Finance agencies and Self-Help Credit Union.

Fannie Mae reported a net loss of $2.2 billion for the quarter ended March 31.

The company, based in Washington, D.C., provides funds to mortgage lenders through the purchase of mortgage assets and issues and guarantees mortgage-related securities that facilitate the flow of funds into the U.S. mortgage market.

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