Cuomo finally widens investigation to Fannie Mae, Freddie

News just keeps getting better??

By adding the two government-chartered enterprises, Cuomo is broadening his nine-month probe to companies that own or guarantee 40 percent of the $11.5 trillion of U.S. residential mortgage debt. He last week sued the real estate appraisal unit of First American Corp., the biggest U.S. title insurer, accusing it of inflating home values under pressure from Washington Mutual Inc.

Fannie Mae and Freddie Mac shares fell and credit-default swaps tied to the companies' bonds climbed to the highest in at least four years, signaling that the risk of default is rising.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. A basis point on a contract protecting $10 million of debt for five years is equivalent to $1,000 a year.

Investors demanded 0.60 percentage points more in yield to own Fannie Mae's 10-year notes than 10-year Treasuries, up from 0.57 percentage points yesterday, according to data compiled by Bloomberg. The spread ended last week at 0.49 percentage points.

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