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 in loans from the government. For several years, Fannie Mae has been under government conservatorship. They have lost money for 12 consecutive quarters. 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. They have lost $ 148 billion in that time period. That amount of money is almost equal to the entire economy of Chile. Though Wall Street has somewhat recovered by now, Fannie Mae and Freddie Mac are still in trouble. Fannie Mae has lost, according to the Wall Street Journal, for the most recent quarter, $ 11.5 billion, though first quarter of 2009 saw losses of $ 23.5 billion.

Fannie Mae in conservatorship

The housing recession almost collapsed the whole U.S. financial system, and as a consequence, Fannie Mae and Freddie Mac went into conservatorship. Basically, they were seized by the government because they couldn't stop losing money. Fannie Mae had assumed the risk for a lot of mortgages, and as more defaulted, the losses went up and up. According to CNN Money, rates of foreclosure have increased by 16 percent, though it has slowed in some areas.

Impact

Both Fannie Mae and Freddie Mac are prime movers in mortgage loans for the U.S. and they hold trillions in mortgage 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 rate of foreclosures doesn't slow down, obtaining a mortgage loan will be hard even for Croesus.

The silver lining

According to the same piece in the Journal, Fannie reported that 5.47 percent of its loans were 90 days past due in March. In February, it was.59 percent. These are modest gains beginning to take place. However, the question becomes how long before small improvements add up to a positive direction for the real estate market overall.

Article resources

Wall Street Journal

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

CNN Money

http://money.cnn.com/2010/04/29/real_estate/worst_foreclosure_markets/index.htm

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This entry was posted on Sunday, May 16th, 2010 at 6:40 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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