Fannie, Freddie Will Expense Stock Options

Fannie Mae and Freddie Mac, the two biggest buyers of U.S. home mortgages, have decided to treat stock options as an expense to make their income statements more clear.

Options granted after Dec. 31, 2001, are being accounted for as a compensation cost, Freddie Mac said. In the second quarter, that expense was less than $4 million.

Fannie Mae will begin expensing in the next grant cycle, pending approval by its board.

Separately, Freddie Mac said second-quarter profit rose as low interest rates cut borrowing costs and helped it weather a slowdown in growth of its mortgage assets.

Operating earnings rose 26% to $968 million, or $1.30 a share, 8 cents better than estimates.

Freddie Mac shares gained 74 cents to $55.41, and Fannie Mae gained 4 cents to $67.04, both on the New York Stock Exchange.