Fannie Mae could be hit hard by housing bust:Mort giant could lose $29 bil

[NVMojo]

Mortgage giant could lose $29 bln, long-term bear argues in investor letter

Sept. 18, 2006

SAN FRANCISCO (MarketWatch) -- The worst of Fannie Mae's regulatory troubles may be behind it, but one longtime skeptic of the mortgage giant thinks it could face bigger problems from trouble in the U.S. housing market.
Gilchrist Berg, founder of $2 billion Jacksonville, Fla.-based hedge-fund firm Water Street Capital, said in a recent letter to investors that Fannie Mae (FN53.77, 0.00, 0.0% ) could lose $22 billion to $29 billion if, as he expects,
the housing bubble bursts and foreclosures increase.
"We are not sure the folks running the show fully embrace the risk of declining house prices," Berg wrote in the letter, a copy of which was obtained by MarketWatch. If the housing market continues to decline "a major portion of Fannie Mae's value could be wiped out." He declined to comment for this story.

Fannie Mae spokesman Alfred King said the company protects itself from housing-market volatility in many ways, including maintaining a geographically diverse book of business and focusing on mortgages that have a high percentage of equity in them.
Berg is considered a leading practitioner of short selling, a trading technique used to bet against stocks.

His Polar Fund, which focuses on short positions, returned more than 10% a year from September 1987 through September 2002 -- beating the Standard & Poor's 500 Index. It's not clear how well the fund has done since, although Berg's recent letter noted that the Polar Fund was up 1.38% during the first half of 2006, lagging the S&P 500.

Berg has been shorting Fannie stock since the summer of 2003, when questions emerged about its accounting. Earlier this year, the company agreed to pay a $400 million fine after its regulator, the Office of Federal Housing Enterprise Oversight, accused executives of manipulating results.
The stock has dropped roughly 15% since the beginning of August 2003. It's up more than 10% so far this year.

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[Captain Hilts]

1. If they're looking for sympathy...

they'll find it between 'shit' and 'siphyllis' in the dictionary.

No, I can't spell 'syphllis'.

[NVMojo]

2. it's just more of the Bush regime propping up things so we don't see

but we do ...