Mortgages Uncovered

Fears rattled US shares for the US mortgage finance giants Freddie Mac and Fannie Mae who have plunged again based on fears that the government will be forced to bail the pair out.

The slide reignited further concerns about the health of their financial sector and also sent the US stock market into a sharp decline.

Reports by US financial weekly suggested that the chances of needing a government rescue were increasing.

The Treasury said that they had no plans to bail out the 2 firms, which in turn underpin the entire US mortgage market.

The Treasury gained necessary authority to bail out Freddie Mac and Fannie Mae, which included buying shares in the 2 companies if needed, with a rescue plan which was approved at the end of July 08.

US officials anticipated that the 2 firms would be unable to raise the money they required to improve their financial footing.

A newspaper said that a government bailout would more likely wipe out the existing holders of the firms’ current shares. Both the firms were trading near to 18year lows.

Stocks rattled:
Then shares of Fannie Mae fell to more than 22%, ($1.76, to close at $6.15), and shares of Freddie Mac fell nearly 25%, ($1.46, to close at $4.39).

Dow Jones’ Industrial Average fell from 180.51 (1.55%), to 11,479.39 points which was also rattled by a Wall Street report who suggested Lehman Brothers’ quarterly earnings would possibly be weaker than expected.

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