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10.11.2006 08:59 Real Estate
Fannie Mae (NYSE:FNM - News) warned on Nov. 8 that it will be late providing its third quarter results -- but the New York Stock Exchange is letting the mortgage giant continue listing until at least Dec. 31. The news, along with gains by Democrats in the midterm elections, which may lessen the chances of legislation unfavorable to the mortgage-finance giant, appeared to boost investor confidence in the stock on Nov. 8.
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Fannie Mae, which is changing its accounting after a recent scandal, has yet to file its Form 10-K for 2004 and 2005 and is in the midst of restating earnings for 2002 and 2003. The New York Stock Exchange generally starts delisting companies that take more than a year to file their annual reports, but it has granted Fannie Mae's request to continue listing its shares until Dec. 31, 2006, at which time the situation will be reviewed.
The news hits after Election Day, as Democrats pick up enough seats in the House of Representatives to take control back from the Republicans, according to press reports. Regulatory oversight of Fannie Mae has long been a battle in the government, with Republicans introducing legislation providing for tougher supervision of Fannie and other government-sponsored enterprises.
Fannie Mae isn't going to turn in its third quarter results in time for the Nov. 9 due date and won't ask for the five day extension permitted, the mortgage giant said in a Securities and Exchange Commission filing Nov. 8. "We have determined that our previously filed audited and interim financial statements for the periods from January 2001 through the second quarter of 2004 should no longer be relied upon," Fannie Mae said in the filing.
Investors bid up Fannie Mae's stock nearly 3% to $61.67 per share in early afternoon trading on the New York Stock Exchange. Its rival Freddie Mac (NYSE:FRE - News) rose 2% to $71.26 per share.
Fannie Mae also said that its restatement and related regulatory costs will total approximately $850 million for 2006. Costs for periods subsequent to 2004 will total over $200 million for full year 2006.
"Overall, the filing offers assurance that FNM is on track, despite cost increases," said Citigroup analyst Bradley Ball in a research note. (Citigroup has received compensation for business done with Fannie Mae in recent months.)
Standard & Poor's equity analyst Stuart Plesser hiked his twelve-month target price by $8 to $63 per share. Plesser said "we believe the threat of adverse legislation has been mitigated." (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)
The United States Attorney's Office had advised Fannie Mae in August, 2006, that it was discontinuing its investigation of Fannie Mae's accounting and would not file charges. The Justice Department had also ended a two year investigation into Fannie Mae's accounting around that time.
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