- Posted August 08, 2011
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Fannie Mae's 2Q loss widens, will ask for $5.1B
WASHINGTON (AP) -- Government-controlled mortgage company Fannie Mae said last Friday that its second-quarter loss widened as it continues to seek loan modifications to help reduce defaults amid the ongoing difficulties in the housing and mortgage markets.
Fannie Mae also said that it will ask for $5.1 billion in funds from the Treasury through a request by the acting director of the Federal Housing Finance Agency.
Fannie's rescue has been one of the most expensive government bailouts. It has received nearly $100 billion from the Treasury to stay afloat.
Fannie Mae, based in Washington, D.C., and sibling Freddie Mac, based in McLean, Va., were created by Congress to buy mortgages from lenders and package them into bonds that are resold to global investors.
They own or guarantee about half of all mortgages in the U.S., or nearly 31 million home loans worth more than $5 trillion. Along with other federal agencies, they backed nearly 90 percent of new mortgages over the past year.
The government took over the companies in September 2008 after massive losses on risky mortgage bonds threatened to topple them. The government then put them into conservatorship, a legal arrangement under which the companies' government regulator controls their financial decisions.
In the second quarter ended June 30, Fannie Mae lost $5.18 billion, or 90 cents per share. That compares with a loss of $3.13 billion, or 55 cents per share, a year earlier.
The quarter included $6.1 billion in credit-related expenses tied to its pre-2009 book of loans. Fannie anticipates future loan defaults and related charge-offs tied to this book of business will occur over several years. But there is a bright spot, as these loans are becoming a smaller percentage of its guaranty book of business, declining to 34 percent at quarter's end as compared with 39 percent of its guaranty book of business as of Dec. 31, 2010.
The problem with many of the loans from the pre-2009 book of business is that they were obtained when home prices were rising. Home prices peaked during the third quarter of 2006, Fannie said. Since that time the U.S. economy has fought to regain its footing after a recession. This economic uncertainty, combined with high unemployment levels and low levels of consumer confidence, has pushed home prices down. Many homeowners now struggle to pay for their mortgages, while others feel stuck in their homes due to the supply that's on the market.
Fannie Mae said last Friday that it aims to lower its credit losses while keeping as many families as possible in their homes and protecting property values.
"We remain the largest source of liquidity for the U.S. mortgage market, and we are committed to creating long-term value by helping to build a stable, sustainable housing market for the future," President and CEO Michael J. Williams said in a statement.
Fannie completed more than 80,000 single-family loan workouts in the quarter, with more than 59,000 of them involving loan modifications, repayment plans and forbearances.
The single-family foreclosure rate of 1.20 percent on an annualized basis was less than the 1.52 percent from a year ago. But Fannie said that it is taking more time to cycle through foreclosures, which is increasing its credit-related expenses and hurting its single-family serious delinquency rates. The company predicts these delays will hurt the overall recovery of the housing market because it will take more time to get rid of the distressed home supply that is out there.
Fannie Mae said 47 percent of its new single-family book of business includes loans bought or guaranteed since the start of 2009. The company anticipates loans acquired in 2009, 2010 and the first half of this year will be profitable over their lifetime, but said it is still too early to tell what will happen.
The period's results also included $2.3 billion in dividend payments to the U.S. Treasury.
Revenue climbed 16 percent to $5.24 billion from $4.5 billion.
Net interest income, or money earned from deposits and loans, increased 18 percent to $4.97 billion from $4.21 billion.
Published: Mon, Aug 8, 2011
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