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