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Fannie Mae Looks Like Hell
Posted By Barry Ritholtz On November 16, 2007 @ 11:30 am In Corporate Management,Credit,Derivatives,Short Selling,Valuation | Comments Disabled
Fannie Mae’s fuzzy math : Fortune magazine reported that the lender changed the
way it discloses bad loans, which could be masking rising credit losses.
“Investors might want to take a closer look at Fannie Mae’s latest
earnings report. Lost in the unsurprising news of the mortgage lender’s
heavy losses was a critical change in the way the company discloses its
bad loans — a move that could mask that credit losses that are rising
above levels that the company predicted just three months ago.
Without the change in disclosure, an important yardstick for credit losses that Fannie Mae provides to investors would have looked much worse than it did in financials filed last week.
Mae’s potentially misleading disclosure comes at a crucial time for the
company. Fannie Mae was severely penalized last year for overstating
earnings and for a lack of oversight. As part of its punishment, the
amount of home loans that Fannie Mae can make was limited.”
There’s a quick and dirty look at Fannie Mae at the chart below.
Early Friday, Fannie Mae (FNM) shares were little changed; (UPDATE: On Thursday after Fortune magazine reported
site disclosed this info, and the stock tanked). This morning, it was down as much as 10%.
The charts looks eerily similar to Tyco (TYC) back int he days pre-disaster -– and where
there is smoke, there is often fire.
Fannie Mae’s fuzzy math 
Fortune, November 15 2007: 9:29 AM EST
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 Fannie Mae’s fuzzy math: http://money.cnn.com/2007/11/15/magazines/fortune/fannie_losses.fortune/index.htm?postversion=2007111509
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