Fitch Affirms GSE Subordinate Debt Ratings

Fitch Ratings has affirmed the subordinated debt ratings of Fannie Mae and Freddie Mac at AA-minus and removed them from Rating Watch Evolving. The rating outlook is Stable. Fitch said the actions were based on the support represented by senior preferred stock purchase agreements between the U.S. Treasury and the companies. The agreements protect senior and subordinated debtholders from potential losses from the operations of the government-sponsored enterprises because any deficiency of assets versus liabilities will be "made whole" up to $100 billion, Fitch said. As conservator, the Federal Housing Finance Agency has waived the interest deferral triggers of the subordinated debt, assuring timeliness of interest and principal, the rating agency said. "Fitch believes the flexibility provided by the conservatorship in conjunction with the Agreements sufficiently protect the interest and principal payments due, despite the long-term tenor of the subordinated debt and the uncertain structure beyond 2009," Fitch said.