Moody's lowers Fannie Mae, Freddie Mac preferreds to Baa3

Moody's Investors Service said it downgraded the preferred stock of Fannie Mae and Freddie Mac to Baa3 from A1. The companies' Aaa senior long-term debt ratings, Prime-1 short-term debt ratings and Aa2 subordinated debt ratings were affirmed.

The preferreds remain on review for possible downgrade, the outlook on the subordinated debt was changed to negative from stable, and the outlook for the remaining ratings is stable.

The agency said the downgrade reflects a greater risk of dividend omission on the preferreds and Moody's view that Fannie Mae and Freddie Mac currently have limited access to common and preferred equity capital at economically attractive terms.

Fannie Mae's and Freddie Mac's other debt ratings were affirmed because of the agency's view that these companies benefit from very high systemic support due to their central role in mortgage finance in the United States, as well as the importance of housing within the U.S. economy.

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