Global ratings firm announced on Wednesday, August 2nd, that it has downgraded the Long-term Issuer Default Ratings (IDRs) and senior unsecured debt ratings of the United States’ largest mortgage finance firms. 

That means the ratings for both Fannie Mae and Freddie Mac have gone from AA+ to AAA. 

The downgrade came in the wake of the firm’s downgrade of the US economy in general on Tuesday, August 1st. The announcement of the economic downgrade elicited the wrath of White House officials and also came as a shock to investors who surmised that the end of the congressional debt ceiling crisis back in June would have been enough to prevent such a situation from happening.

It should also be noted at this point that Fitch officials already warned about a potential downgrade for the mortgage finance firms as recently as May of this year when it appeared that the congressional impasse regarding the US government debt ceiling would go on indefinitely. 

They Should Have Seen It Coming

Indeed, Gennadiy Goldberg, TD Securities’ head of US rates strategy, strongly believes that the announcement of the economic downgrade on Tuesday should have been construed as a warning that the same fate was in the offing for both Fannie and Freddie. 

Goldberg explained that, as the ratings are linked, the downgrade for the two mortgage firms was already a given. 

However, he added that most investors may be indifferent to the change as the single-notch drop is not expected to affect most crucial investment decisions.