Fitch: Receivership Wouldn't Affect GSE Ratings

If Congress decides to equip the new GSE regulator with receivership powers, it should not affect the ratings of Fannie Mae's and Freddie Mac's debt securities, according to Fitch Ratings."While some view the provision of receivership powers as reducing government implied support [for the two government-sponsored enterprises], Fitch does not believe this is the case," according to a statement issued by the rating agency. Fitch points out that banking regulators traditionally have receivership powers and that the GSE regulator bill now under consideration by the Senate Banking Committee would not change Fannie's and Freddie's ties to the U.S. government. The GSEs and their allies are lobbying to block the receivership provision, contending that it would increase the GSEs' cost of funds and drive up mortgage rates. Fitch's statement contains a cautionary note, however, that investors may conclude that Congress has changed Fannie's and Freddie's GSE status. "Since Fannie Mae and Freddie Mac's business conduct relies heavily on unimpeded market access and favorable pricing, such investor sentiments, if reflected in higher funding costs, could present a change in financial performance and ultimately ratings consideration," Fitch says. The Senate Banking Committee is preparing to mark up the GSE regulator bill on April 1.