Moody's cuts Fannie and Freddie preferreds to Ca

Moody's Investors Service said it affirmed the Aaa senior long-term debt, prime-1 short-term debt and Aa2 subordinated debt ratings of Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corp. (Freddie Mac) following actions taken by the U.S Treasury to support both companies and their placement into conservatorship by the Federal Housing Finance Agency.

Moody's also said it lowered the preferred stock ratings for both companies to Ca from Baa3 and lowered their bank financial strength ratings to E+ from D+.

The outlook is stable.

The affirmed ratings reflect Moody's view that support actions provide further evidence of the high degree of systemic support for both entities because of their central role in mortgage finance in the United States, as well as the importance of housing within in the U.S. economy.

The downgrade of the preferred stock ratings reflects the conservator's decision to suspend the non-cumulative preferred stock dividends at both firms, the agency said, adding that those dividends will likely be suspended for several years.

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