NEW YORK (Bloomberg) — Lehman Brothers Holdings Inc., once the largest US underwriter of mortgage-backed bonds, fell to an eight-year low in New York trading as home-loan financing companies Fannie Mae and Freddie Mac extended yesterday's drop.

Lehman declined $2.44, or 12 percent, to $17.30 in New York Stock Exchange composite trading, the lowest level since February 28, 2000, according to data compiled by Bloomberg.

Financial stocks sank this week on speculation government-backed Fannie Mae and Freddie Mac will need to raise more capital to withstand the credit contraction that has saddled banks and brokerages with $408 billion of write-downs. Lehman was also hit by speculation that some of its biggest customers had ceased doing business with the firm, which the clients denied.