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Saturday, May 9, 2009

Fannie Still Getting Spanked
Story from CNN Money


NEW YORK (CNNMoney.com) -- Fannie Mae, the troubled mortgage finance company, reported a first-quarter loss of $23.2 billion on Friday.

The mortgage giant also reported that it submitted a request for $19 billion from the Treasury Department to cover its losses. That followed a request earlier this year for $15.2 billion to cover 2008 losses.

It also said Treasury has doubled its support level to the company to $200 billion, as President Obama had authorized.

In its quarterly release, Fannie Mae said its entire mortgage portfolio was experiencing increases in delinquency and default rates. It blamed the rise in unemployment, falling home prices and the revaluation of homes in the wake of the economic downturn.

The mortgage company's first-quarter net loss was less than its fourth-quarter loss of $25.2 billion, which occurred immediately after the government takeover.

The most recent quarterly loss is more than 10 times the $2.2 billion net loss reported for the first quarter of 2008, before the government takeover.

Fannie Mae said its diluted loss per common share was $4.09.

Going forward, the mortgage giant said that it fully expects to ask for more financial support from the federal government.

"Due to current trends in the housing and financial markets, we expect to have a net worth deficit in future periods, and therefore will be required to obtain additional funding from the Treasury," said the company, in its quarterly report.

Friday morning's stock rally left Fannie Mae behind. Fannie Mae's (FNM, Fortune 500) stock price, currently less than $1 per share, fell about 7% in the first hour of trading.

Government influence: Fannie Mae said it imposed a moratorium on foreclosures for most of the quarter. But that failed to stop foreclosures from increasing, compared to the prior quarter. The company said it acquired 25,374 single-family homes through foreclosure in the first quarter of 2009, compared to 20,998 in the fourth quarter, 2008.

"I think Fannie Mae is largely used as probably the single largest tool of the government right now to try and reverse the losses in the mortgage market," said David Ursani, analyst for Wall Street Strategies. "As a result of that, a lot of those losses are funneling through [Fannie Mae.]"

Ursani said it's difficult to tell when Fannie Mae's situation will improve, given its unusual status as a government-supported entity, and the dismal state of the mortgage market.

"Fannie Mae, right now, is pretty much part of the government," he said. "I can't really see it becoming independent from the government anytime soon."

Fannie Mae recently went through a change at the top, appointing Michael J. Williams as its new chief executive on April 20. Williams had previously served as chief operating officer.

The former chief executive, Herbert M. Allison, Jr., accepted a new job in April to oversee the $700 billion financial rescue fund, known as the Troubled Asset Relief Program (TARP).

Allison had led the mortgage giant since it was seized by the government in September, along with Freddie Mac