Fannie Mae to Raise $6 Billion in Capital After Loss

Source: Bloomberg.com

May 6 (Bloomberg) -- Fannie Mae, the largest U.S. mortgage- finance company, reported a wider loss than analysts estimated, cut its dividend and said it will raise $6 billion in capital as the worst housing slump since the Great Depression deepens.

The Washington-based company tumbled as much as 12 percent in early trading and said its credit-market losses will be worse next year. The first-quarter net loss was $2.19 billion, or $2.57 a share, compared with a loss of 64 cents a share anticipated by analysts, the average of 12 estimates from a Bloomberg survey.

The ``severe weakness'' in the housing market was worse than expected in the quarter and will continue this year, Chief Executive Officer Daniel Mudd said in a statement. The new capital may help the company weather credit and derivative losses that rose fivefold to $8.9 billion. The money raised may still not be enough if the housing slump continues into 2009, said Ajay Rajadhyaksha, head of fixed-income strategy for Barclays Capital.

``They are now starting to realize the fact that their credit losses will be considerably higher than they were in 2007,'' said Rajadhyaksha, who is based in New York. ``Things in the housing and credit markets are deteriorating very fast and this will not be the last capital raising this year.''

Read more: http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=ava6rLMVLLA4

I think it's getting set up!!!!