Fannie Mae Stock Gets Thumbs-Up from Salomon

A leading securities analyst believes Fannie Mae and the mortgage finance stocks will continue to perform strongly for the balance of this year and perhaps longer.

Bruce Harting of Salomon Brothers, New York, wrote in a report distributed last week: "Fannie Mae's growth prospects in the event of a gradual slowdown in the economy are strong, making the stock a relative outperformer in the market."

He pointed to widening interest rate margins, stronger loan-purchase volume, and accelerating bottom-line earnings growth as the key factors that bode well for Fannie's shares.

Mr. Harting was more bearish on Freddie Mac. That agency "will experience several more quarters of subpar earnings growth as a result of temporary credit problems," he said.

About mortgage insurers, Mr. Harting said all of them are operating "in the best of all possible business environments."

His reasons:

*Decreasing competition from GE Capital Mortgage Insurance Corp.

*Healthy loan origination volume.

*Low unemployment and reasonable income growth, leading to fewer defaults.

*Improving premium margins as a result of deeper coverage requirements.

*The switch from annual to monthly premiums.

About Countrywide Credit Industries, his other mortgage finance stock, he wrote: "Our outlook has improved, reflecting our anticipation of another Fed easing in November, and the likelihood of another bond rally."

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