The stocks of Fannie Mae and Freddie Mac have been dealt another blow - this time by the Orange County bankruptcy. As a result, at least one analyst is now rating the stocks as "high risk."

The bankruptcy caused the spreads between agency debt and Treasury debt to widen, according to Smith Barney analyst Thomas O'Donnell. Spreads widened as the market anticipated that $10 to $15 billion of agency debt controlled by Orange County would soon be up for sale, Mr. O'Donnell said.

The agency debt, primarily issued by Fannie Mae and the Federal Home Loan Banks, was offered as collateral by Orange County to several investment banks for repurchase loans. The investment banks called the loans last week.

The spreads between Fannie and Freddie debt, which have already been unusually wide this year, widened further by 0.1 to 0.15%, Mr. O'Donnell said in a report last week.

Stocks of both agencies fell after the bankruptcy announcement last Wednesday. Stock of Fannie Mae - formally the Federal National Mortgage Association - fell by about 2% to $70.625. That of Freddie Mac - the Federal Home Loan Mortgage Corp., fell about 2.7%, to $49.

Mr. O'Donnell attributed the fall to moves in the agency debt market and said he believed Fannie and Freddie may be forced to slow the growth of their portfolios if the cost of debt goes up.

He warned that the stocks would continue to be plagued by "near- term volatility and weakness." He is now rating the stocks as "high risk."

"In this uncertain interest rate environment, where surprises like that of Orange County can occur, (Fannie Mae and Freddie Mac are) increasingly seen by investors as less able to grow as steadily, as predictably, or as easily as in the recent past," Mr. O'Donnell said in his report.

Both stocks have been battered in recent months, as investors worry that rising rates will slow the growth of earnings at the two government-backed secondary market agencies.

In recent weeks, talk of "user fees" in Washington - to be levied on all loans that pass through the agencies - has also spooked investors.

Housing lobbyists say that the agencies may be targeted for fees, as Congress and the administration search for revenue to offset a middle-class tax cut.

Both agencies counter that user fees are unlikely.

Mr. O'Donnell said he expects both stocks to recover from their losses this year.

In a statement, Freddie Mac chief financial officer Richard Daniel said the effect on the agency's debt spreads is temporary.

"We don't believe it will have any . . . long-lasting effect on our ability to profitably grow our mortgage portfolio," Mr. Daniel said.

"While spreads have been widening for a variety of reasons throughout this year, we have a broad base of investors and a tremendous variety of securities to raise money," said Fannie Mae spokesman David Jeffers.

Widening spreads "do not concern us," he added.

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