CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed the long- and short-term Issuer Default Ratings (IDR) and senior debt ratings of Fannie Mae (FNM) and Freddie Mac (FRE) at 'AAA' and 'F1+', respectively. The 'AAA' IDRs reflect the government support rating of '1'. The Rating Outlook on the long-term IDR for both government-sponsored enterprises (GSEs) is Stable.Fitch has also affirmed the U.S. federal government 'AAA/F1+' sovereign credit ratings with a Stable Outlook. Though the fiscal risks associated with Treasury support for the GSEs are substantial, in themselves they do not imperil the US 'AAA' status. Despite the marked deterioration in budgetary performance and rise in government debt, overall indebtedness remains comparable with other large 'AAA' sovereigns such as France and Germany.
Fitch has also downgraded FNM and FRE's preferred stock to 'C/RR6' from 'BBB-'. The downgrade of the preferred stock reflects the subordination of the preferred to any Treasury interest and interest payments are unlikely to resume in the foreseeable future. Thus, any recovery is expected to be minimal.
Additionally, Fitch has placed the 'AA-' subordinated debt ratings for both FNM and FRE on Rating Watch Evolving. Treasury's preferred securities will rank below subordinated debt-holders. FHFA management stated that interest will continue to be paid on the subordinated debt and the deferral requirements now in place will be waived. Fitch will evaluate the terms and conditions of Treasury's agreement to determine the appropriate subordinated debt rating. A complete list of rating actions follows the end of the press release.
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