Shares of mortgage financiers Fannie Mae and Freddie Mac were in freefall Monday morning as fresh capital concerns rocked the two companies.
Lehman Brothers analyst Bruce Harting warned today that accounting rule change FAS 140, which may require off-balance sheet securitizations to move onto balance sheet, could force Fannie Mae to bolster capital by $46 billion and Freddie Mac to add a $29 billion capital cushion.
And while the OFHEO said the two companies were “adequately capitalized” just less than a month ago, Freddie Mac’s previously announced $5.5 billion capital raise has been delayed, stoking investor fears.
Freddie now expects to raise the capital next month, after second quarter earnings are released, which some analysts believe will significantly raise their cost of capital.
The two government-sponsored entities are also dealing with rising mortgage delinquencies, which have essentially doubled from a year earlier, along with falling home prices, putting considerable strain on the pair who have been expected to prop up the ailing housing sector.
Fannie Mae was off $3.56, or 18.96%, to $15.22, while Freddie Mac shares fell $3.08, or 21.24%, to $11.42 in early afternoon trading on Wall Street.
At one point, Freddie Mac shares dipped as low as $10.28 during the session, the lowest point since October 1992.