“We do not expect to be profitable in the foreseeable future”, claims management
Fannie Mae has asked the U.S. Treasury for more money to be put in what looks more and more as a bottomless well. This time, the mortgage-finance company taken over by the government in one of the very first interventions put in place in order to halt the financial crisis landslide is asking for a $10.7 billion capital investment as an eighth straight quarterly loss drove its net worth below zero once again.
It’s Fannie Mae’s third request of public money from a $200 billion government lifeline. The company claimed a second-quarter net loss of $14.8 billion as the origin of the request filed in with the Securities and Exchange Commission.
These results bring the company’s cumulative losses over the last two years to $101.6 billion and will bring its total draw on the Treasury to $44.9 billion since April.
The credit quality of loans and mortgage bonds that Fannie Mae owns or guarantees have deteriorated as a recession that began in December 2007 pushed more homeowners into foreclosure. A record 1.5 million U.S. properties received a default or auction notice or were seized in the first half of this year, 15 percent more than a year earlier, as employers cut jobs and temporary programs to assist homeowners came to an end, RealtyTrac Inc. said July 16.
Fannie Mae said it expects the quality of its assets to worsen further and to continue accumulating losses as it executes President Barack Obama’s efforts to modify or refinance loans for as many as nine million homeowners.
“We do not expect to operate profitably in the foreseeable future,” the company said in its filing. “We expect that we will experience adverse financial effects as we seek to fulfill our mission by concentrating our efforts on keeping people in their homes and preventing foreclosures.”
Fannie Mae and smaller competitor Freddie Mac, which own or guarantee almost half of U.S. residential mortgage debt, are integral to Obama’s plan to help homeowners. In February, the government doubled its emergency capital commitment for each company from $100 billion, which the Treasury makes through preferred stock purchases.
Fannie Mae’s net worth, or the difference between assets and liabilities, was negative $10.6 billion as of March 31, compared with negative $18.9 billion on March 31 and negative $15.2 billion on Dec. 31, according to company statements.
Fannie Mae and Freddie Mac are the largest U.S. mortgage- finance companies, owning or guaranteeing about $5.4 trillion of the $12 trillion residential mortgage debt.
The Federal Housing Finance Agency put the companies under its control Sept. 6 and forced out management after examiners said the two might be at risk of failing amid the worst housing slump since the Great Depression.