Fitch cuts Fannie preferred shares, may cut Freddie

NEW YORK, July 17 (Reuters) - Fitch Ratings on Thursday cut Fannie Mae's (FNM.N) preferred stock ratings and said it may cut them again and also may downgrade Freddie Mac's preferreds due to uncertainties of how U.S. government plans for the mortgage finance companies will impact the shares.

The top "AAA" ratings of both companies' senior debt were affirmed.

The U.S. Treasury Department and Federal Reserve on Sunday announced sweeping measures to lend money and buy stocks if necessary in embattled mortgage lenders, after their stock was pummeled over fears over their capital base.

The government's plan to maintain the liquidity of Fannie Mae and Freddie Mac (FRE.N) reflects the high probability of external support for the companies and their importance in the U.S. housing market, which underpins the "AAA" ratings on their senior debt, Fitch said in a statement.

However, the review to downgrade their preferred shares "reflects the uncertainties surrounding the U.S. Treasury's plans, in general, and potential impact on preferred shareholders specifically, from any needed equity investment from the Treasury," Fitch added.

The downgrade of Fannie Mae's preferred stock also reflects the higher proportion of the securities to its core capital, in lieu of recent erosion in its core capital due to operating losses.

"Fitch expects that percentage will increase in the second quarter of 2008 due to the recent capital raise," it said. "As a result, Fitch believes that preferred shareholders have greater exposure to potential losses."

Fitch cut Fannie Mae's preferred shares one notch to "A-plus," the fifth highest investment grade. Freddie Mac's preferred shares are also rated "A-plus." (Reporting by Karen Brettell; Editing by Kenneth Barry)