Fannie Mae Management Shakeup Announced Late Wednesday

In late mortgage market news, Fannie Mae's CEO and board of directors announced a shuffling of the executive suite. No doubt these moves were to restore confidence in the rapidly falling mortgage finance giant.

Daniel Mudd, the company's chief executive officer, will remain in place while Steve Swad, the chief finance officer and Enrico Dallavecchia, the chief risk officer were replaced. Current chief business officer, Peter Niculescu, in contrast, had his role significantly expanded in the new executive line-up.

Board chairman, Stephen Ashley lent support to Mudd's position stating that "The board of directors is firmly committed to Dan Mudd...[and] will continue to work closely with Dan and his management team to guide the company and support the housing finance system through a very challenging period."

Fannie Mae has lost nearly 90% of its share value over the last year as it battles the mortgage meltdown. Financing or insuring more than 50% of US mortgages it has been crushed by the wave of defaults, foreclosures, and simultaneous free falling housing prices.

Hoping to restore confidence, short of a bailout, recent legislation gave Secretary of the Treasury Henry Paulson broad powers to infuse cash into the ailing government sponsored entity (GSE). However, this seemed only to encourage the market to assume this is the forgone conclusion, resulting in nationalization and wiping out shareholders--assumptions that put Fannie and Freddie shares into a steep dive toward zero.

Mudd reassured stakeholders that these moves were to address the critical points of risk and uncertainty swirling around Fannie Mae. "This team will be responsible for conserving capital and controlling credit risk," Mudd explained in his statement.

Trading was briefly suspended for the announcement and fell as the day ended. However, the shake-up seems to be easing concerns lifting Fannie Mae and Freddie Mac throughout after-hours trading.

Most experts cite the management adjustment necessary, but still lays the ultimate solution at the feet of policymakers.