Fannie Posts $11.5bn Net Q1 Loss, Looks to Treasury for $8.4bn in Aid

Government-sponsored enterprise Fannie Mae (FNM) posted a Q110 net loss of $11.5bn, narrowed from the $15.2bn loss in the previous quartered as the adoption of new accounting standards led to a swelling of the balance sheet. The Federal Housing Finance Agency (FHFA), acting as Fannie’s conservator, requested $8.4bn in aid from the Treasury Department to cover the $8.4bn Q1 net worth deficit. The request on Fannie’s behalf comes after the FHFA requested $10.6bn in aid for brother GSE Freddie Mac (FRE) after it lost $6.7bn in Q110. Fannie on Jan. 1, 2010 adopted Financial Accounting Standards (FAS) 166 and 167, which require the GSE to consolidate most of its MBS trusts. As a result, Fannie now records the trusts’ underlying mortgages on its consolidated balance sheets: As HousingWire reported, Fannie purchased or guaranteed an estimated $191.4bn of loans in Q110, including $40bn of delinquent loans bought out of mortgage-backed security (MBS) trusts in March. The GSE’s estimated market share of new single-family MBS issuance was 40.8% in Q110, up from 38.9% in the previous quarter. Fannie said mortgages purchased in the quarter bore a weighted average loan-to-value ratio of 69%, and a weighted average credit score of 758. “The strong credit characteristics of our acquisitions during the quarter are evidence that we continue to strike an appropriate balance in providing liquidity while also applying the lessons of the recent credit cycle,” said Fannie Mae president and CEO Mike Williams. Fannie continues to pursue workout options for troubled mortgages it owns or guarantees. In Q110 alone, for example, more than 120,000 Fannie loans were in some form of workout — including deed0in-lieu, completed forbearance plans or modification. This figure is up 100% from just over 60,000 in Q409: “Working with our lender partners, we completed 94,000 loan modifications in the quarter, more than half of which were conversions of trial modifications under the Obama Administration’s Home Affordable Modification Program [HAMP],” Williams said. As of the end of Q110, Fannie had 296,295 mortgages in active HAMP trials, and 79,658 mortgages in permanent HAMP status. Of the permanent HAMP mods, all of which included rate reductions, 43% were term extension and 22% employed forbearance. The HAMP modifications led to a median $486 monthly principal and interest reduction. Write to Diana Golobay. Disclosure: the author holds no relevant investments.

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