Stock Alert for Fannie Mae ($FNM)

Fannie Mae (NYSE: $FNM)

Federal National Mortgage Assoc. (Fannie Mae) (FNM), a government-sponsored enterprise, provides liquidity and stability support in the secondary mortgage market in the United States. It securitizes mortgage loans originated by lenders in the primary mortgage market into mortgage-backed securities, which are bought and sold in the secondary mortgage market. FNM operates in three segments: Single-Family Credit Guaranty, Housing and Community Development (HCD), and Capital Markets. The Single-Family Credit Guaranty segment securitizes single-family mortgage loans into Fannie Mae mortgage-backed securities (MBS) and facilitates the purchase of single-family mortgage loans for the Company’s mortgage portfolio. The HCD segment securitizes multifamily mortgage loans into Fannie Mae MBS and facilitates the purchase of multifamily mortgage loans for the Company’s mortgage portfolio. This segment also invests in rental and for-sale housing projects. The Capital Markets segment manages the Company’s investment activity in mortgage loans, mortgage-related securities, debt financing activity, and liquidity and capital positions.

The Company’s customers include mortgage banking companies, savings and loan associations, savings banks, commercial banks, credit unions, community banks, insurance companies, and state and local housing finance agencies. FNM was founded in 1938 and is based in Washington, the District of Columbia.

Share Statistics (29-April-10)			FY 2008	FY 2009	% Chg	Q4 2008	Q4 2009	% Chg
Symbol	FNM	Revenue, $Mn	43,123	39,355	-8.7%	10,954	9,264	-15.4%
Current price	$1.26	Gross marg.	20.4%	36.9%	80.9%	24.5%	39.9%	62.9%
52wk Range:	0.51-2.13	Oper. margin	–	-185.5%	–	–	-166.4%	–
Avg Vol (3m):	25,146,500	Net margin	-136.1%	-182.9%	34.4%	-230.3%	-163.8%	-20.9%
Market Cap.	1.41B
Shares Outstanding	1.12B	EPS, $	-21.99	-11.94	-45.7%	-3.86	-2.58	-33.2%

Source: Reuters.com, SEC Filings.

Financial Summary

FNM  reported a net loss of $15.2 billion in the fourth quarter of 2009, compared with a net loss of $18.9 billion in the third quarter of 2009. Including $1.2 billion of dividends on the Company’s senior preferred stock held by the U.S. Department of Treasury, the net loss attributable to common stockholders was $16.3 billion, or ($2.87) per diluted share, in the fourth quarter of 2009, compared with a loss of $19.8 billion, or ($3.47) per diluted share, in the third quarter of 2009.

The Company’s fourth-quarter results were driven primarily by credit expenses, which declined from the third quarter but remained at an elevated level, and its recognition of a $5.0 billion loss on the Company’s low income housing tax credit investments.

For the full year of 2009, FNM reported a net loss of $72.0 billion, compared with a loss of $58.7 billion for 2008. Including $2.5 billion of dividends on its senior preferred stock, the net loss attributable to common stockholders was $74.4 billion, or ($13.11) per diluted share, compared with $59.8 billion, or ($24.04) per diluted share, for 2008.

The fourth-quarter loss resulted in a net worth deficit of $15.3 billion as of December 31, 2009, taking into account unrealized gains on available-for-sale securities during the fourth quarter. As a result, on February 25, 2010, the Acting Director of the Federal Housing Finance Agency (FHFA) submitted a request for $15.3 billion from Treasury on the Company’s behalf. FHFA has requested that Treasury provide the funds on or prior to March 31, 2010.

Net revenue was $5.8 billion in the fourth quarter of 2009, down 3% from $5.9 billion in the third quarter of 2009:

• Net interest income was $3.7 billion, down 3% from $3.8 billion in the third quarter of 2009, primarily due to a slight decline in the average balance of the Company’s interest-earning assets. For the year, net interest income was $14.5 billion, up 65% from 2008.

• Guaranty fee income was $1.88 billion, down 2% from $1.92 billion in the third quarter of 2009, due to lower fair value adjustments on buy-ups and certain guaranty assets. For the year, guaranty fee income was $7.2 billion, down 5% from 2008.

For the year, net revenue was $22.5 billion, up 29% from $17.4 billion in 2008.

Source: www.fanniemae.com

Financial Strength (29-April-2010)	Company	Industry	Sector	S&P 500
Quick Ratio (MRQ)	–	2.31	4.65	0.75
Current Ratio (MRQ)	–	2.35	8.50	0.90
LT Debt to Equity (MRQ)	–	409.50	106.13	143.72
Total Debt to Equity (MRQ)	–	678.45	291.61	206.21
Interest Coverage (TTM)	-1.03	0.13	-3.92	8.78

Source: Reuters.com, SEC Filings.

Analyst Consensus

Buy

Outperform

Hold

Underperform

Sell

No Opinion

This is the consensus forecast amongst two polled investment analysts. Against the Federal National Mortgage Association (Fannie Mae) company.

Analyst Detail	Buy	Outperform	Hold	Underperform	Sell	No Opinion
Latest	0	0	0	2	0	0
4 weeks ago	0	0	0	2	0	0
2 months ago	0	0	0	2	0	0
3 months ago	0	0	0	2	0	0
Last year	0	0	1	0	1	2

Source: www.ft.com

Consensus Estimates Analysis

	# of Estimates	Mean	High	Low	1 Year Ago
EARNINGS (per share)
Year Ending Dec-10	1	-6.90	-6.90	-6.90	–

Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=FNM

Investment Highlights

FNM recently reported that it has sold $1 billion of two-year notes in a reopening of an existing 1.25% two-year issue. According to its report, the notes will mature on June 22, 2012, and were priced at 100.011 to yield 1.245 percent.  The settlement date is May 3.

On Tuesday, the Company announced the extension of its seller assistance incentive on all Fannie Mae-owned HomePath properties. The Company has said that buyers will receive 3.5% of the final sales price to be used toward closing cost assistance or their choice of selected appliances.  The offer is available to any owner-occupant who closes on the purchase of a property listed on www.HomePath.com by June 30, 2010.

Early last week, FNM’s Economics & Mortgage Market Analysis Group released its April 2010 Economic Outlook, which projected an economic growth of 3.1% for all of 2010, despite a dip in the first quarter,

and stated that housing is stabilizing but excess inventory and shadow supply are hindering recovery.

A press release quoted FNM chief economist Doug Duncan as saying: “Financial conditions are improving as seen by the unwinding of various programs, most notably the MBS purchase program which ended in March. This is strong evidence that the Fed believes the financial sector can stand on its own. “We estimate that June 2009 was the end of the recession, a good sign that we’re moving forward.  Nevertheless, significant improvements in the labor market and consumer spending will be the big hurdles as we move toward recovery in the housing market and broader economy.”

To read the full April 2010 Economic Outlook, visit the Economics & Mortgage Market Analysis page at the Company’s Web site.

Source: www.fanniemae.com

Technical Analysis

Source: http://stockcharts.com

Tuesday, FNM closed above its 13-day moving average. This is generally considered to be an indication of a bullish trend.

FNM’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility.

FNM’s MACD is indicating a weak bearish signal. Although the indicator is above the critical level of 0, which implies that the underlying moving averages are bullish, the MACD has crossed below its 9-day moving average or signal line. This suggests that positive momentum has begun to slow.

Comparative Analysis

Company Name	Ticker	Price per	Mrkt. Cap.	P/E		P/S
Apr-29-2010	symbol	Share, $	$ Mn	2009	2010	2009	2010
Freddie Mac	FRE	1.54	998.50	n/a	n/a	n/a	n/a
Federal Agricultural Mortgage Corp.	AGM	22.59	229.13	n/a	5.48	n/a	1.83
Median				n/a	n/a	n/a	n/a
Fannie Mae	FNM	1.26	1,410	n/a	n/a	n/a	0.06

Source: Thomson Financial

Insider Trading Activity

NET SHARES PURCHASE ACTIVITY Inside Purchases – Last 6 Months
	Shares	Transaction
Purchases	n/a	0
Sales	n/a	0
Net Shares Purchased (Sold)	n/a	0
Total Insider Shares Held	212.19K	n/a
% Net Shares Purchased (Sold)	0.0%	n/a

Net Institutional Purchases — Prior Qtr to Latest Qtr
	Shares
Net Shares Purchased (Sold)	(241,352,000)
% Change in Institutional Shares Held	284.0%

Source: Yahoo Finance

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