Fannie to Tap Into U.S. Treasury Again, This Time for $15.3B

Fannie MaeMortgage finance giant Fannie Mae, already majority-owned by the U.S. government through “conservatorship,” is requesting to tap into a U.S. Treasury credit facility for an additional $15.3 billion in its ongoing efforts to help “every borrower we can and to address rising foreclosures.”
That would bring to a total of more than $128 billion sought by both Fannie Mae and Freddie Mac from the Treasury’s open-ended credit line.
Fannie made the request public today after reporting a fourth-quarter 2009 loss of $16.3 billion, including $1.2 billion in dividend payments to the Treasury. The fourth-quarter result is down from $25.2 billion the previous year, and $19.8 billion in the third quarter. But for all 2009, Fannie’s losses soared to $74.4 billion, compared with $59.8 billion in 2008.
Fannie’s chief regulator, Federal Housing Finance Agency, FHFA, has formerly requested that Treasury provide the $15.3 billion on or prior to March 31, 2010.
That amount “takes into account unrealized gains on available-for-sale securities during the fourth quarter,” Fannie said in a statement.
Fannie, as with smaller “sibling” Freddie Mac, has a government-mandated mission to assist borrowers in need of financing to purchase or rent affordable housing. The two stockholder-owned corporations help inject liquidity into the housing finance market through the purchase of mortgages from banks and other lenders that are then re-sold as mortgage-backed securities to investors.
“Through this prolonged stress in the housing market, we are helping homeowners across the country, supporting affordable housing and providing financing to keep the residential markets functioning,” said Fannie Mae President and CEO Mike Williams. “Our homeownership assistance initiatives grew significantly in 2009, reaching more than 3 million borrowers. We continue to work closely with our industry partners and the government to reach every borrower we can and to address rising foreclosures. Our overriding objective is keeping people in their homes whenever possible.”
During 2009 foreclosure rescue efforts, Fannie said it completed 200,339 loan workouts and initiated 333,300 trial modifications under the government’s Home Affordable Modification Program, or HAMP.
Fannie said the rate of increase in seriously delinquent loans in its single-family book of business stabilized in the fourth quarter. Serious delinquencies represent borrowers 90 days late on their mortgage.
High unemployment and underemployment by borrowers will keep credit-related losses high in the near term, Williams said, “and the fact that many borrowers who owe more on their mortgagees than their houses are worth are defaulting.”
“However, we believe that, absent further economic deterioration, credit-related expenses will be less in 2010 than in 2009,” he said.
Fannie took $9.1 billion of fair value losses associated with acquiring credit-impaired loans in the fourth quarter, compared with $7.7 billion in the third quarter. These fair value losses are reflected in net charge-offs, which were $13.2 billion in the fourth quarter, compared with $11.1 billion in the third quarter.
Fannie Mae and Freddie Mac purchase the bulk of  U.S. mortgages. At the height of the financial crisis, then-Treasury Secretary Henry Paulson placed Fannie and Freddie under virtual U.S. control after the two giants faced billions in losses from its backed subprime and other high-risk, private-label securities
In the aftermath, the two enterprises combined tapped into $113 billion of Treasury credit lines, which were modified into opened-ended credit facilities by President Obama in late December.
Freddie Mac earlier this week reported a loss of $7.8 billion in the fourth quarter, but said it did not need a bailout from the Treasury for now.

One thought on “Fannie to Tap Into U.S. Treasury Again, This Time for $15.3B

  • February 27, 2010 at 1:30 am
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    Im beyond mad, this company should’ve gone bankrupt over a year earlier. We had no buisness stepping into the free market, the government has no buisness. Im ashamed and dissapointed.

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