Shares in US mortgage giants slump

21-08-2008

Shares in US mortgage giants slump
Shares in American mortgage giants Freddie Mac and Fannie Mae have continued to slump, following rumours of a further government bailout.

Fannie Mae, the biggest US provider of housing finance, saw shares fall 27 per cent to $4.40 (£2.35), the lowest recorded level since 1988.

In addition, shares in counterpart mortgager Freddie Mac slumped by nearly 22 per cent to $3.25 (£1.74), their lowest since 1990.

However, the American Treasury has denied there are any plans to offer further assistance to the two lenders – which underpin the American mortgage market.

Fannie Mae's chief executive has also sought to reassure investors no bailout is imminent.

"They have not offered anything and we have not asked for anything," said Mr Daniel Mudd said in a radio interview yesterday morning.

"I don't anticipate that they will do that."

Earlier this year, Congress passed the Foreclosure Prevention Act, which allowed the Treasury Department to extend an unlimited line of credit to Fannie Mae and Freddie Mac for the next 18 months.

Together, Fannie Mae and Freddie Mac own or guarantee half the country's $12 trillion (£6 trillion) stock of home loans. While they do not deal directly with consumers, the organisation's guarantee loans made by commercial lenders.

Despite attempts to shore up the market, foreclosure levels in the American property market have continued to rocket.

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