WASHINGTON — Fannie Mae is making bold cutbacks that will send shock waves through the mortgage market, after posting a quarterly loss Friday that was three times larger than Wall Street expected.
To slow its financial decline, the mortgage finance giant slashed its dividend to 5 cents a share from 35 cents a share and said it will eliminate loans for borrowers with solid credit scores but little proof of income or small or no down payments.
The company also is raising its mortgage fees, which will be passed on to borrowers as higher interest rates or closing costs.
With Fannie Mae and its sibling company, Freddie Mac, becoming more risk-averse, fears are building that mortgage rates will keep climbing, making it harder for people to afford a mortgage or refinance their home, and spur even more foreclosures.
The Washington-based company lost $2.3 billion, or $2.54 a share, for the quarter that ended June 30. The loss, the company’s fourth-consecutive quarter of red ink, compares with profit of $1.95 billion, or $1.86 a share, a year earlier. Analysts had expected a loss of 68 cents a share.
