CSBJ Daily

The Associated Press

Fannie Mae reported losses of $2.2 billion in the first quarter and the nation’s largest buyer of home loans said today it would cut its dividend and raise $6 billion in new capital, with expectations that the housing slump will persist into next year.

Home prices fell faster in the first quarter than Fannie Mae had expected, the government-sponsored company said, and it will open a $4 billion share offering immediately, with the remainder being offered in the “very near future.”

Fannie Mae’s federal regulator, the Office of Federal Housing Enterprise Oversight, announced today that following the stock sale, it will cut the capital surplus cushion the company has to maintain by 5 percentage points to 15 percent. Another five-point cut will come in September, provided there is “no material adverse change” in the company’s regulatory compliance.

The agency’s director, James B. Lockhart, said capital requirements were eased because Fannie Mae has improved internal financial controls following a multibillion-dollar accounting scandal in 2004.

The government has come to rely increasingly on Fannie Mae and Freddie Mac as other lenders have shied away from the risk-heavy market for mortgage securities.

In addition to a reduced capital cushion, Fannie’s estimated market share increased to about 50 percent of the new single-family mortgage related securities issued, and investors seemed to welcome a broader role for the company.

Shares at one point rose nearly 5 percent, were trading up 3.7 percent, or $1.04 cents, at $29.33 by late morning.