Fannie Mae’s earnings restatements may cause the mortgage giant to post the first annual decline in earnings in the past 19 years.

The analyst poll conducted by Thomson Financial yielded an average estimate of $7.36 per share earnings this year, against $7.62 in 2004. The restatement led Fannie to reduce its profit from 2001 to mid- 2004 by $9 billion and caused the ouster of Chief Executive Franklin Raines and Chief Financial Officer Timothy Howard.
Fannie Mae’s earnings will be affected by the rising popularity of adjustable-rate mortgages carrying a lower mortgage rate. ARMs will make up 37% of all home loans in 2006, compared to 19% two years ago.

Adjustable-rate mortgages with rate revision after 5 years allow a home buyer to get a mortgage rate that is 0.82 percentage point lower than the fixed-rate ones. As a result, Fannie’s net yield on its portfolio is down 3% from what it was in 2002, at 3.59%.

``Earnings are going down and there is nothing they can do about it,’’ said Paul Miller, an analyst at Friedman Billings Ramsey Inc. in Arlington, Virginia.