Fannie Rating Faces Cut as Lawmakers Siphon Funds, BofA Says

The odds of credit rating downgrades on the bonds of Fannie Mae (FNMA) and Freddie Mac (FMCC) rose after lawmakers tapped the government-supported mortgage companies to pay for last month’s extension of a payroll tax cut, according to Bank of America Corp.

Investors in the so-called agency debt market should favor the bonds of other government-sponsored enterprises such as the Federal Home Loan Banks and Federal Farm Credit Banks because of the risk, Ralph Axel, a Bank of America analyst in New York, wrote in a Jan. 6 report.

Congress, to finance the two-month extension of the tax cut in December, ordered an increase in the premiums that Washington-based Fannie Mae and Freddie Mac in McLean, Virginia, charge to guarantee mortgage debt. The funds generated by the extra fees will be directed to the government for the next 10 years.

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- Posted: 2012-01-09 14:13:32

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