US mortgage lenders latest victims of Standard & Poor downgrades
Rating agency Standard & Poor's has downgraded the debt of US mortgage giants Fannie Mae and Freddie Mac following on from its stripping America’s debt from the top rating.
The agency said the decision to cut the rating to AA+ was based on the lenders’ dependence on the US government after they were rescued during the 2008 financial crisis.
“Fannie Mae and Freddie Mac were placed into conservatorship in September 2008 and their ability to fund operations relies heavily on the US government,” S&P said.
The move had been expected.
S&P also downgraded 10 out of twelve mortgage banks and the senior debt issued by the Federal Farm Credit Banks.
Fannie and Freddie buy up mortgages from banks and mortgage brokers to keep interest rates low.
US Treasury Secretary Timothy Geithner has insisted the US economy remains strong and called the US credit downgrade from AAA a “terrible judgment.”
But S&P's has warned of further downgrades unless Washington gets its house in order.