Moody's affirms Fannie Mae

Moody's Investors Service said it affirmed Fannie Mae's Aaa senior unsecured debt and B+ bank financial strength ratings with stable outlooks, as well as the company's Prime-1 rating on short-term debt.

The Aa3 preferred stock and Aa2 subordinated debt ratings remain under review for possible downgrade.

According to Moody's, these rating affirmations follow the announcement by Fannie Mae that its financial restatement and audit of fiscal years 2001, 2002, 2003 and 2004 will not be completed until the second half of 2006. The company also announced that this delay may result in the delisting of the company's common and preferred stock from the New York Stock Exchange.

Moody's said that, despite this serious setback, Fannie Mae's status as a leading participant in the U.S. housing finance market, its GSE status, and its effective management of credit and interest rate risks, are not changed, and provide support for the firm's senior unsecured and bank financial strength ratings.

Moody's believes Fannie Mae has made significant progress in increasing its regulatory capital, which included issuing preferred stock and reducing its common stock dividend, and expects the company to meet the 30% surplus capital requirement by Sept. 30, 2005.

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