Fannie Mae Reports Q3 Loss of $29B

Carrie Bay | 11.10.08
Fannie Mae announced its third quarter financial results today, reporting a net loss of $29 billion or ($13.00) per diluted share, driven largely by deteriorating mortgage market conditions, the company said. By comparison, during the second quarter of 2008, Fannie Mae recorded a loss of $2.3 billion and for the third quarter of last year, it lost $1.4 billion. Analysts surveyed by Thomson Reuters had expected a third quarter loss of $1.60 per share, the Associated Press reported.

The government-sponsored enterprise (GSE) attributed its third quarter deficit primarily to a non-cash charge of $21.4 billion to establish a valuation allowance against deferred tax assets, as well as $9.2 billion in credit-related and foreclosed property expenses – the result of decaying mortgage credit conditions and declining home prices, Fannie said.

Washington D.C.-based Fannie Mae's net worth fell to $9.4 billion at the end of September down from $41.4 billion at the end of June. If that number turns negative, Fannie Mae said it would be forced to tap the Treasury Department's $100 billion allotted for GSE funding under the Housing and Economic Recovery Act of 2008 (HERA) signed this summer.

Fannie Mae recorded a $1.8 billion impairment on private-label securities backed by Alt-A (near subprime) and subprime mortgages. Fannie Mae also said it had $71 billion in nonperforming loans and foreclosed property inventory – or 2.4 percent of its total guaranty book of business and foreclosed properties. These numbers compare to nonperforming assets of $52 billion, or 1.8 percent, at the end of the second quarter.

Fannie's single-family foreclosure rate, reflecting the number of single-family properties acquired through foreclosure as a percentage of the total number of loans in the company's conventional single-family mortgage credit book of business, was 0.40 percent for the nine months ended September 30 and was 0.16 percent for the third quarter of 2008, compared with 0.13 for the second quarter. The GSE's inventory of single-family foreclosed properties was 67,519 on September 30, compared with 54,173 as of June 30, and 33,729 as of December 31, 2007.

On September 6, 2008, Fannie Mae began operating under the conservatorship of the Federal Housing Finance Agency (FHFA) at the direction of the U.S. federal government.

To view Fannie Mae's full third quarter earnings results, click here.