Fannie Mae, Freddie Mac Ratings Cut by S&P Amid Reliance on U.S. Backing

[The Northerner]

Standard & Poor’s lowered credit ratings on debt issued by U.S.-backed lenders including mortgage giants Fannie Mae and Freddie Mac, citing its own Aug. 5 downgrade of the federal government’s AAA status.

Fannie Mae and Freddie Mac, which own or guarantee more than half of the almost $11 trillion in outstanding U.S. mortgage debt, were lowered one step from AAA to AA+, S&P said in a statement today. The downgrade reflects their “direct reliance on the U.S. government,” the ratings firm said.

The two companies have operated under U.S. conservatorship since September 2008, when they were seized amid subprime mortgage losses that pushed them toward insolvency. Since then, the government-sponsored enterprises have drawn almost $170 billion in Treasury Department aid.

In cutting the nation’s credit rating on Aug. 5, S&P faulted lawmakers for failing to reduce spending or increase revenue enough to reduce the nation’s budget deficit. Banking regulators including the Federal Deposit Insurance Corp. said that day that government-issued securities would be unaffected by the sovereign downgrade.

The Federal Housing Finance Agency, which regulates Fannie Mae, Freddie Mac and the Federal Home Loan Banks, sought to assure investors that the companies’ bonds were sound.

Read more: http://www.bloomberg.com/news/2011-08-08/fannie-mae-freddie-mac-ratings-cut-by-s-p-amid-reliance-on-u-s-backing.html