Fannie Mae’s Loss for Q2 at $3.1B; Seeks $1.5B from Treasury

Fannie MaeFannie Mae, the largest mortgage financing company, reported its smallest quarterly net loss in the second quarter since its U.S. takeover, requiring an infusion of $1.5 billion from its Treasury bailout program.
That’s significantly down from the $8.4 billion chunk it received in taxpayer aid after its first quarter 2010 loss.
Fannie’s net loss was $3.1 billion in the second quarter, including a $1.9 billion of dividends paid on its senior preferred stock held by the Treasury, compared with a loss of $13.1 billion in the first quarter of 2010.
A ward of the U.S. government since the housing market collapse of September 2008, Fannie Mae had drawn a total of $83,600 billion in taxpayer funds before the current request of $1.5 billion.
Freddie Mac, the smaller mortgage funds provider under U.S. conservatorship, has received an additional $61,300 billion in bailouts.
Fannie and Freddie’s total bailout tally now stands at more than $146 billion.
The Treasury’s unlimited credit line – a lightning rod for Republicans who have proposed a phase-out of Fannie and Freddie – is scheduled to run through the end of 2012.
As the Obama Administration prepares an overhaul plan for both Fannie and Freddie by the end of the year, the larger company’s second-quarter report provided a positive trend: Credit-related expenses – provisions for credit losses plus foreclosed properties’ expenses – were $4.9 billion, down from $11.9 billion in the first quarter of 2010.
 The reduction in credit-related expenses reflected a decrease in the rate of seriously delinquent loans in the second quarter of 2010 to 4.99 percent as of June 30, 2010, from 5.47 percent as of March 31, 2010.
Factors in the reduction included “home retention and foreclosure alternative workouts that the company completed, as well as a higher volume of foreclosures; and a decrease in average loss severities.”
Fannie also updated its loan-loss allowance model “which resulted in a change in estimate and a decrease in the allowance for loan losses of approximately $1.6 billion.”
These factors were partially offset by an out-of-period adjustment of $1.1 billion related to an additional provision for losses on pre-foreclosure property taxes and insurance receivables.
Almost all Fannie’s realized credit losses in 2009 and 2010 on single-family loans are linked to loans that it purchased or guaranteed from 2005 through 2008.
“While these loans will give rise to additional credit losses that it has not yet realized, the company estimates that it has reserved for the substantial majority of these losses,” Fannie Mae reported.
Fannie Mae estimates that home prices on a national basis improved by 2.2 percent in the second quarter of 2010, and have declined 16.9 percent from their peak in the third quarter of 2006.
It projects that home prices will decline slightly for the balance of 2010 and into 2011 before stabilizing.
Additionally, Fannie said that home sales will be basically flat for all of 2010. Residential mortgage debt outstanding is expected to decline for the third year in a row.
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