NEW YORK (Reuters) - Fannie Mae’s chief executive took a 15 percent pay cut in 2007 as the No. 1 mortgage finance company struggled with soaring credit expenses.
Fannie Mae FNM.N CEO Daniel Mudd received $12.2 million in total compensation last year, down 15 percent from 2006, the government-sponsored enterprise said on Wednesday. Mudd’s pay included his $990,000 salary, a $2.23 million bonus and a $9 million “long-term incentive” award, the company said.
In 2006, Mudd received a $3.5 million bonus and a long-term incentive award of about $10 million, Fannie Mae said. Total pay for 2006 was $14.45 million.
Fannie Mae has been hurt as the housing slump and rising mortgage delinquencies boosted credit expenses to $2 billion in the first nine months of 2007 from $400 million. The company reported a $1.5 billion third-quarter loss and predicted the housing slump would worsen in the fourth quarter and 2008.
Mudd on Tuesday told a Citigroup Inc. conference that he underestimated the speed and depth of the housing decline.
Shares of Fannie Mae lost a third of their value in 2007, and continued to decline in January amid expectations that its holdings of risky subprime mortgages and reliance on shaky bond insurers would produce write-downs. But the company appears better positioned than its rival Freddie Mac FNM.N, which holds more subprime securities, analysts said.
Losses on securities have challenged the company at a time when lenders are asking it to take a more prominent role in the U.S. housing market. The market share of Fannie Mae and Freddie Mac has surged in recent months as competing sources of funding — such as Wall Street investment banks— have dried up.
Fannie Mae’s business could also be boosted more by the federal economic stimulus plan that would increase the limit on loans by 75 percent to $730,000.
Additional reporting by Julie Haviv; Editing by Leslie Adler