Stocks in the financial sector were getting roughed Monday, with financial-services firm

Marshall & Ilsley


and mortgage buyers

Fannie Mae



Freddie Mac


leading the declines.

Investors sold off shares in M&I after the Wisconsin-based bank said it plans to take a $900 million provision in the second quarter. Originally, the bank thought it would record a charge of $415 million as it continues to trudge through residential loan losses. Shares were down 12%.

Fannie Mae and Freddie Mac were even worse off, tumbling more than 20% at one point after an analyst at Lehman Brothers expressed worries about new accounting requirements that might force both government-formed companies to raise billions of dollars in new capital.

A Friedman Billings Ramsey analyst warned of rising problems with residential construction loans, and that dragged down

SunTrust Bank

(STI) - Get Report


Washington Federal



Roughly 20% of Washington Federal's loan portfolio consists of builders' loans, and the stock crumbled 11% to $15.37. SunTrust, which has about 6% of its portfolio in home-construction loans, gave back 10% to $31.38.

Merrill Lynch


slipped 2% to $30.39 as

The Wall Street Journal

reported that the brokerage was getting closer to selling its stake in


(BLK) - Get Report



. The move would be an attempt to generate capital in order to offset losses that could be recorded in the second quarter.


NYSE Financial Sector

index reflected the negativity as it declined 3% to 5959.56.

However, there was a shining spot for mortgage insurers as


(RDN) - Get Report

skyrocketed 70% before settling down to a gain of 51.9%. Last Thursday, the insurer announced that it paid out less in claims during the second quarter than expected and on Monday it named a new head of its mortgage unit.

The Philadelphia-based firm was trading at $1.55, a gain of 53 cents. Similarly,

PMI Group


jumped 7.4% to $1.59 as investors hoped to hear that it too, was able to contain its payouts.