Troubles facing two of the largest US housing finance providers Fannie Mae and Freddie Mac show not signs of easing just yet. Last week ended with Moody’s Investor Service downgrading both the preferred stock and bank financial strength ratings of the two mortgage finance companies

The preferred stock ratings of Fannie and Freddie fell as much as by five notches from an earlier “A1” to “Baa3”, which is just one level above junk status. Moody’s also lowered the companies’ financial strength ratings from “B-“to “D+”. The ratings agency moreover revealed that the ratings of the two beleaguered companies will remain on review and may be downgraded even further.

A financial strength rating of D+ signifies that the companies are only moderately financially stable and potentially need some type of outside support like infusion of capital. The downgrade of preferred stock in case of Fannie and Freddie means that the companies will probably have to suspend the payment of a preferred dividend. It also reflects concern about the treatment of its preferred securities in case the government decides to bail them out.

Fannie Mae and Freddie Mac are two of the biggest mortgage providers in the US and between them own or back almost half of the county’s mortgage debt. Ever since the housing market crisis, the companies have been tottering on the edge of a major crash, giving rise to expectations of government intervention.