Fitch affirms Fannie Mae senior debt

Fitch Ratings said it has affirmed all senior debt and issuer default ratings of Fannie Mae following OFHEO's release of its investigative report of accounting and internal controls at Fannie Mae.

Additionally, Fannie Mae's subordinated debt and preferred stock ratings remains on rating watch negative.

Fitch affirmed Fannie Mae's ratings with a stable outlook, including the long-term issuer default rating at AAA, long-term senior debt at AAA and short-term F1+ rating.

The following ratings remain on rating watch negative: subordinated debt at AA- and preferred securities at A+.

Fitch said it believes the OFHEO report may spur additional board and management board changes, litigation and potentially lengthen the discovery phase of pending lawsuits. It also places additional pressure on capital due to the potential for higher settlements or judgments. The report discusses an enterprise whose management was mired in earnings management and manipulation.

Fitch said that while it also highlights some turnover at the senior management level, it may negatively impact management by increasing distractions and turnover.

Both the board and management will need to demonstrate a material change in culture and improved transparency, the agency said.

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