Fannie Mae Posts $25.2 Billion Q4 Loss, Requests More Aid

Fannie Mae (FNM) reported Thursday a loss of $25.2 billion, or $4.47 per share, in the fourth quarter of 2008,  as it also requested additional capital from the Treasury. “Fourth-quarter results were driven primarily by $12.3 billion in net fair value losses, credit-related expenses of $12.0 billion, and securities impairments of $4.6 billion, as deterioration in mortgage performance, home prices, and in the credit markets continued to adversely affect our financial results,” Fannie Mae said in a press release. Investment losses were $4.6 billion in the fourth quarter, up from $1.6 billion in the third quarter. Those losses were driven by “other-than-temporary impairments of available-for-sale securities backed by Alt-A and subprime mortgages,” Fannie Mae said, as home values continued to decline. Total nonperforming loans were $119.2 billion at year-end, compared with $63.6 at the end of Q3 and $27.2 billion at the close of 2007. Fourth-quarter’s loss was less severe than third-quarter’s $29 billion loss, but full-year 2008 losses still mounted to $58.7 billion, or $24.04 per share — sky high in comparison to the $2.1 billion loss in 2007. The Director of FHFA, acting as conservator, submitted Wednesday a request for $15.2 billion from the U.S. Treasury on Fannie Mae’s behalf under the terms of the Senior Preferred Stock Purchase Agreement, in order to eliminate its net worth deficit as of December 31, 2008. Under the agreement, active as of September, the Treasury is required to provide funds whenever the GSEs report a negative net worth. FHFA has requested the Treasury provide the funds by March 31, 2009. Just last week the government doubled Fannie Mae and Freddie Mac’s lifelines to $200 billion each to guarantee they wouldn’t fail. The increase in cash was “not a judgment about the expected losses ahead,” said Treasury Secretary Timothy Geithner, according to a New York Times report. “It’s just a way to make sure people understand that they will be able to play this role going forward.” Government entities Fannie Mae and Freddie Mac are crucial to the Obama administration’s housing rescue plan aimed at lowering mortgage costs and preventing foreclosures, but the companies themselves may have some waters to wade as the nation rides out the housing crisis. “We expect the market conditions that contributed to our net loss for each quarter of 2008 to continue and possibly worsen in 2009, which is likely to cause further reductions in our net worth,” Fannie Mae said in a statement. Write to Kelly Curran at Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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