Fannie Mae cut its quarterly dividend in half as part of the GSE's effort to build the capital required by its regulator the Office of Federal Housing Enterprise Oversight. Cutting Fannie's common dividend by 50% to $0.26 is expected to improve its relations not only with OFHEO but with Congress as well.
In a report released after the announcement of the cut was made, Banc of America Securities analysts said that by cutting its dividend, Fannie would be saving roughly $500 million in the next two quarters and making it better capitalized. BofA analysts think this is neutral for agency debt spreads. However, they said that this should be slightly positive for mortgage-backed spreads.