Fitch Ratings has lowered the rating outlooks for Fannie Mae, Freddie Mac and four Federal Home Loan Banks (FHLBs) from ‘stable’ to ‘negative.’ The actions follow Fitch's revision of the U.S. sovereign rating outlook, which was also lowered to negative.
The rating agency has also affirmed at AAA the long-term issuer default ratings (IDRs) of Fannie Mae, Freddie Mac and the four affected FHLBs, which are Atlanta, Boston, San Francisco and Seattle.
Given the material credit expenses stemming from Fannie's and Freddie's legacy books of business and the companies' quarterly dividend obligation to the U.S. Treasury, Fitch believes it is likely that one or both firms will continue to rely on capital support from the Treasury for the foreseeable future.
Fitch further states that it believes the Obama administration will continue to provide ongoing support to Fannie and Freddie and, as a result, Fitch expects to maintain the equalization of the companies' long- and short-term IDRs and rating outlooks with those of the U.S. sovereign.
Fitch similarly says the FHLBs, as GSEs, are linked to the U.S. sovereign rating, adding that it anticipates resolution of the negative outlook on the FHLBs will coincide with Fitch's resolution of the negative outlook on the U.S. sovereign rating.