Analysts at Keefe, Bruyette & Woods on Monday downgraded shares of Fannie Mae (FNM) and Freddie Mac (FRE) to underperform from market perform and cut their price target on both stocks to zero. "In order for the government-sponsored entities to survive going forward, we believe they need to be recapitalized through investments from the banks that benefit from their role in the secondary market," KBW wrote in a research note. "In this scenario, both the common and preferred equity of the GSEs should be worthless," they said, adding that since being put into receivership last summer, the U.S. has put $98 billion of capital into Fannie and Freddie. Fannie recently fell 1.4% premarket to $1.44, and Freddie was off 1.7% to $1.69.

-John Spence; 415-439-6400; AskNewswires@dowjones.com