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Fitch Ratings said Tuesday it has affirmed at AAA its long-term default ratings for government-controlled mortgage giants Fannie Mae and Freddie Mac, reflecting the government's implied guarantee standing behind them and its ongoing injections of billions in aid into them. The rating agency also said it is keeping its outlook "stable," meaning it expects the default ratings to remain there.
The move came in tandem with Fitch's decision announced earlier Tuesday to keep its rating on U.S. debt at the highest grade, AAA. That's better than the other two big rating agencies: Moody's Investors Service lists the U.S. debt at AAA but says its outlook is negative. And Standard & Poor's touched off a firestorm in the stock market last week after it knocked down its rating on the U.S. to the second-highest grade, AA-plus, for the first time.
The ratings of Fannie and Freddie are linked to that of the United States, Fitch noted in a news release. The government rescued the two companies in September 2008 and has funded them since the 2008 financial crisis. Taxpayers have spent about $150 billion to rescue them, the most expensive bailout of the crisis. Fannie and Freddie own or guarantee about half of all U.S. mortgages and nearly all new mortgages.
Similarly, after Standard & Poor's issued its downgrade of the U.S. rating earlier this month, it also downgraded the ratings of Fannie and Freddie and other entities tied to long-term U.S. debt. The downgrade applied only to corporate bonds, not the mortgage-backed securities that Fannie and Freddie issue.
The Obama administration unveiled a plan in February to slowly dissolve Fannie and Freddie, although that process could take years. Abolishing Fannie and Freddie would transform how homes are bought and redefine who can afford them.