Fannie Shares Recover After Grim Results

The stock market looked past grim earnings results at Fannie Mae (FNM Quote) on Tuesday and focused on the prospect of a wider role for the government-backed mortgage giant in the floundering U.S. housing market.

Fannie reported a $2.19 billion first-quarter loss before Tuesday's opening bell that caught Wall Street off guard and sent stocks tumbling. The largest buyer of U.S. home loans said it will raise $6 billion in fresh capital -- a move federal regulators have demanded -- and it slashed its quarterly dividend payments by 29% to preserve cash. It also reported that its loan-loss provision soared to $5.2 billion from $249 million, as CEO Daniel Mudd said he doesn't expect a real recovery in the U.S. housing market before 2010.

Nevertheless, shares of Fannie reversed into positive territory in early trading after it reported results, recently adding $1.46, or 5.1%, to $29.75. The rally came as the Office of Federal Housing Enterprise Oversight, the federal regulator charged with monitoring government-sponsored housing giants Fannie and Freddie Mac (FRE Quote), announced it would lift a consent order it placed on Fannie two years ago and lower the company's capital reserve requirement to 15% from 20% after the capital raise. ...