Will new business lines like mortgage insurance and foreclosure-sale consultancy help Fannie Mae's stock break into higher territory?

A parade of new programs was brought out at the agency's biennial investor-analyst conference last week in Washington as company officials sought to drive home the theme of the event, that "the best is yet to come."

The presentation got a muted reaction in the stock market, although some analysts emphasized that they remain bullish on Fannie Mae shares. The stock slipped Thursday, the day of the conference. But it was up 37.5 cents Friday to $43.625, still shy of its 52-week high of $44.125.

Gary J. Gordon of PaineWebber Inc. said Friday that he continues to view Fannie as an attractive stock, saying he was "more sure" of earnings growth after the meeting.

Mr. Gordon said it makes sense for Fannie to seek new markets at this stage, just as it made sense for Coca Cola Co. to market globally at a certain stage in its development. And he said "at least some" of the programs "are likely to come to fruition."

More impressive to Mr. Gordon, however, were improvements in credit quality that "should increasingly differentiate Fannie Mae from other lenders," and the agency's confidence that it can keep up a 10% to 15% growth rate in its core conventional home mortgage portfolio without margin compression.

Thomas O'Donnell, who covers Fannie Mae for Smith Barney Inc., said the emphasis on new business was a necessary response to the notion-misguided, he thinks-that Fannie is a big company with no room left to grow.

As Fannie moves into new business lines, however, it will require a "balancing act" for the government-sponsored enterprise to avoid the perception that it is "an 800-pound gorilla" trying to barge into new territory, he added.

Among the plans are a mortgage insurance program that already has drawn fire for being outside Fannie Mae's mission and a service, unveiled at the meeting, to help lenders and investors dispose of foreclosed property.

Michael Quinn, a senior vice president of credit-loss management for Fannie Mae, said the idea for an asset disposition service grew out of an existing loss mitigation program.

Reasoning that a 1% improvement in the recovery on foreclosed property translates into a $20 million annual saving for the agency, Fannie Mae has put together a network of brokers and appraisers and now gets substantial discounts on appraisals, title work, carpeting, and appliances, enabling it to reduce disposition costs, Mr. Quinn said.

Clients would pay a fee to share the benefits of that system, he said.

Fannie Mae officials also said improved credit-scoring techniques would enable it to lend to people who previously have been deemed too risky and that it would expand lending on manufactured homes and apartments. Chairman and chief executive James A. Johnson said that reverse mortgages, which enable the growing population of elderly Americans to tap the equity in their homes, have "enormous potential" for Fannie Mae.

In other market news, specialty finance analyst E. Reilly Tierney, 32, has left Duff & Phelps for Fox-Pitt, Kelton. He will continue to cover subprime auto and mortgage lenders.

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