Fortune.com posted an interesting article about some account changes that Fannie has made that helps to hide an increase in non-performing loans. The disclosures sent the stock down almost 5% on Friday. Clearly, financial institutions are under tremendous strain from defaulting home loans.
Fannie Mae calculated its credit-loss ration using a new method that was more favorable to the company. To do this, the company claimed that it could recover a certain percent of the mortgage value that was in default. Experts think this claim is dubious and what's even more suspicious is the fact that Fannie Mae didn't document the change in its filings, a normal practice.
The company has been a top performer over the last 20 years, benefiting from its quasi-governmental status as well as a expanding housing market. One has to wonder how the company will do with the deflating housing market.
Comments
Vince R
November 18, 2007
whether intentional or not, their accounting change is tres stupido in light of their accounting problems from several years ago. they had to mistake over 6 billion in earnings. it effectively ended their upward climb - see stock chart.
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Roger Rodriguez
November 21, 2007
There's going to be more pain as mortgage problems continue to grow. They're going to need to do more than cook the books to come out okay.
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