Bottom Drops Out Of Fannie Mae Losses

Mortgage giant Fannie Mae just announced record losses, and the company is asking for another $ 8.4 billion from the government to stay afloat. For several years, Fannie Mae has been under government conservatorship. Its losses have grown almost exponentially, and have posted the 12th consecutive quarterly loss. They are either in far deeper trouble than we realized or the fast cash from the taxpayers did no good at all.

12 quarters at a loss for Fannie Mae

For 12 quarters in a row now, Fannie Mae has operated at a loss. Not only that, but the mortgage financing giant has seen about $ 148 billion go down the drain over that time. That’s almost the entire GDP of Chile. Though it may seem the effects of the housing recession and bailouts are already forgotten by Wall Street, Fannie Mae and Freddie Mac are still troubled. According to the Wall Street Journal, Fannie Mae losses amount to $ 11.5 billion, contrasted to first quarter 2009 losses of $ 23.5 billion.

Fannie Mae under government control

The housing recession almost collapsed the whole U.S. financial system, and as a consequence, Fannie Mae and Freddie Mac went into conservatorship. Essentially, they were seized by the Federal government because they couldn’t stop losing money. Because Fannie Mae had assumed the risk for so many mortgages, as the numbers of defaults rose, so did the company’s losses. A recent article on CNN Money reports that the rate of foreclosure has slowed in some areas, but still managed to rise by 16 percent.

Fallout

Both Fannie Mae and Freddie Mac are prime movers in mortgage loans for the U.S. and both hold trillions in assets. Portions of those assets have become toxic. The homeowner and the bank lose money on an underwater mortgage, and mortgage loan modification will only accomplish so much. If the real estate market doesn’t improve, and the rate of foreclosures doesn’t slow down, it will be incredibly difficult for anyone to get a mortgage loan.

Hope springs though

Fannie also reported, from the same Journal piece, that 5.47 percent of its loans were 90 days past due in March. In February, it had been 5.59 percent. This means some modest improvements are beginning to happen. However, the question becomes how long before small improvements add up to a positive direction for the real estate market overall.

Citations

Wall Street Journal

http://online.wsj.com/article/SB10001424052748703880304575236030191182938.html?mod=WSJ_Commodities_RIGHTMoreInMarkets

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Bottom Drops Out Of Fannie Mae Losses

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