Fannie Mae is making bold cutbacks that will send shock waves through the mortgage market, after posting a quarterly loss Friday that was three times larger than Wall Street expected. To slow its financial decline, the mortgage finance giant slashed its dividend to 5 cents a share from 35 cents a share and said it will eliminate loans for borrowers with solid credit scores but little proof of income or small or no down payments. The company also is raising its mortgage fees, which will be passed onto borrowers as higher interest rates or closing costs. With Fannie Mae and its sibling company, Freddie Mac, becoming more risk-averse, fears are building that mortgage rates will keep climbing, making it harder for people to afford a mortgage or refinance their home.
Buffett’s Berkshire declines 8 percent
Berkshire Hathaway Inc. reported an 8 percent decline in second-quarter profit Friday because it collected fewer insurance premiums and recorded $1 billion in unrealized derivative losses. Billionaire Warren Buffett’s company said it generated $2.9 billion in net income, or $1,859 per share, during the quarter that ended June 30. That’s down from the $3.1 billion net income, or $2,018 per share, it reported in the same period a year ago. The three analysts surveyed by Thomson Financial were expecting earnings per share of $1,370.33 on average.
Yahoo loosens ad policies
Yahoo Inc. will let its Web visitors decline ads targeted to their browsing habits, becoming the latest Internet company to break from a common industry practice as Congress steps up scrutiny of customized advertising and consumer privacy. Yahoo has been offering that opt-out choice only to ads the company runs on outside, partner sites. Yahoo said Friday it now would extend that option to ads displayed on its own sites, to boost users’ trust — and in doing so, perhaps draw visitors from its rivals. The option will likely be available by month’s end.
McDonald’s posts sales gains
Despite a tough U.S. economy, McDonald’s Corp. posted an 8 percent gain in July same-store sales on Friday as hungry consumers worldwide lined up for breakfast items and the classic Big Mac sandwich. Many consumers have cut back on eating out amid economic weakness and rising gasoline prices, but business at the Golden Arches held up well in July, especially in the U.S. Same-store sales, or sales at stores open at least 13 months, grew 6.7 percent in the U.S. Same-store sales are a key indicator of restaurant performance because the measure growth at existing locations rather than new ones. Total sales worldwide soared 15.9 percent.
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