S&P warns it may downgrade Fannie, Freddie credit

By The Associated Press | July 15, 2011 | 3:29 PM EDT

WASHINGTON (AP) — Standard & Poor's is warning mortgage giants Fannie Me and Freddie Mac that they may lose their top credit ratings if lawmakers don't raise the U.S. government's borrowing limit in time to avoid a default.

S&P says government-controlled Fannie and Freddie, along with certain Federal Home Loan Banks and Farm Credit System Banks, could also default on their debts because each institution is in "direct reliance on the U.S. government."

The rating agency this week threatened to lower the U.S. government's credit rating if the White House and Congress can't agree to raise the $14.3 trillion borrowing limit. The government reached its borrowing limit in May. The Treasury Department says the government will default on its debt if the limit isn't raised by Aug. 2.