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May 10th, 2009

Fannie Mae: We need a few billion more



The bleeding among the secondary market entities goes on. Fannie Mae lost another $23 billion in the first quarter of the year, and is back asking for more money:

Fannie Mae, operating under a federal conservatorship, asked the U.S. Treasury for a $19 billion capital investment and raised the possibility that its long-term survival may be dependent on continued government funding.

Fannie Mae, which took $15.2 billion in aid on March 31, cited the “unprecedented” housing market slump and government-mandated programs that are creating “conflicts in strategic and day-to-day decision making,” according to company filings today with the Securities and Exchange Commission.

The first-quarter net loss widened to $23.2 billion, or $4.09 a share, pushing Fannie Mae’s net worth below zero for the second time. The credit quality of loans and mortgage bonds that Fannie Mae owns or guarantees deteriorated amid the yearlong economic recession and as the government forced the company to help struggling homeowners refinance or modify their loans. [Emphasis added]

“Future activities that our regulators, other U.S. government agencies or Congress may request or require us to take to support the mortgage market and help borrowers may contribute to further deterioration in our results of operations and financial condition,” Fannie Mae said in the filing.

Just a few months ago, the government doubled its capital commitment for Fannie Mae and Freddie Mac to $200 billion; now we’re committed to ‘investing’ up to $400 billion into the two entities. And note well Fannie’s warning that “its long-term survival may be dependent on continued government funding” due to its obligation to pay dividends to the Treasury. In short, the money comes out of one pocket and goes into the other.

Also note the bolded part of the quote above. Doesn’t that sound as though Fannie (and, ostensibly, Freddie) is being forced to lose money?

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One Response to “Fannie Mae: We need a few billion more”

  1. Taos Real Estate Mortgage Report from TLT | Taos Real Estate Says: May 13th, 2009 at 9:23 am

    [...] Fannie Mae: We need a few billion more [...]

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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