Fannie Mae'sFNM CEO told shareholders Friday he does not expect a housing market recovery until late 2009, "at the earliest," and that the mortgage-finance company is strong enough to ride out the downturn.
Fannie Mae "will weather the turbulence of today's mortgage market and prosper when better conditions return," the president and CEO, Daniel Mudd, said as he and other top executives faced shareholders for the first time in three-and-a-half years at an annual meeting.
After posting a third-quarter loss of $1.4 billion, the largest U.S. buyer and guarantor of home mortgages recently cut its dividend and announced plans to sell $7 billion in preferred stock to raise capital to keep its cushion against risk within regulatory requirements.
One shareholder unconvinced by Mudd's assurances was investor activist Evelyn Y. Davis, who rose at the meeting and urged the government-sponsored company's directors to replace Mudd with Louis Freeh, the former FBI director elected to the Fannie board last spring.
Freeh is "the only one who would clean this up and really do this right," said Davis, whose mordant criticism of the company's leaders dominated much of the two-hour meeting.
Davis, who often peppers corporate CEOs with questions at shareholder meetings, said she would not vote for any of the directors standing for re-election other than Freeh. Freeh previously was general counsel and ethics officer of credit-card issuer MBNA.
Despite Davis's protestations, the 12 Fannie directors — nine of whom came to the company after its accounting crisis in 2004 — were re-elected.
Mudd said Fannie Mae was "in a stronger position" because of the extensive changes to its management and operations over the past three years made in the wake of its $6.3 billion accounting scandal and with the recent steps taken to curb losses and buttress its finances.
He called them "extraordinary steps, but steps we believe are prudent."
The Fannie chief reaffirmed his gloomy forecast for the housing market, saying "This is the worst housing and mortgage market in recent memory, and we are still working our way to the bottom, in our view."
It was Washington-based Fannie Mae's first annual meeting since May 2004, five months before the accounting crisis erupted and led to the ouster of its highest executives, tarnished its reputation, and prompted federal regulators to fine it and impose restraints on its operations.
"We are rebuilding our culture," Chairman Stephen Ashley told the shareholders.
Fannie's stock price has been battered. On Friday, shares rose 7 cents to $34.83, or about 50% below the high point of $70.57 over the past year.