Fannie Mae losses widen in 2Q, requests $5.1 billion

Fannie Mae reported a loss of $5.2 billion, or 90 cents per share, in the second quarter, which included $2.3 billion in dividend payments to the Treasury Department. The loss widened 39% from one year ago but did drop from an $8.6 billion loss reported in the previous quarter. To cover the mortgage giant’s net worth deficit, its regulator the Federal Housing Finance Agency, requested another $5.1 billion in bailout from the Treasury. Since entering conservatorship in September 2008, Fannie owes the Treasury $104.8 billion. Through June, losses on the Fannie Mae single-family book of mortgages acquired during the housing boom between 2005 and 2008 totaled $130 billion. This includes the amount of reserve the company holds for future losses. Fannie expects future defaults and charge-offs on this legacy book to continue “over a period of years.” Meanwhile, the legacy book is shrinking. Loans acquired between 2005 and 2008 accounted for roughly 34% of Fannie’s entire book of business as of the end of the second quarter, down from 39% at the end of last year. Despite the ongoing losses on the old book, Fannie continues to support a struggling housing market. It remains the single largest issuer of mortgage-backed securities in the second quarter with a market share of new issuances at 43.2%, up from 39.1% one year ago. Since January 2009, Fannie Mae has provided nearly $2 trillion in liquidity to the mortgage market. “While the mortgage markets are still not stable, access to liquidity is essential to recovery,” Fannie Mae CFO Susan McFarland told HousingWire Friday. “As we continue to work through our legacy book of business, we are building a new book, which is now almost half of our overall guaranty book and it’s filled with high-quality, high FICO score loans.” The same holds for the multifamily market. As of the end of March 2011, Fannie Mae owned or guaranteed roughly one-fifth of the U.S. outstanding debt on multifamily loans. In the first half of 2011, Fannie Mae guaranteed roughly $306 billion in mortgages, enabling lenders to originate more than 1.2 million single-family and multifamily loans. “We remain the largest source of liquidity for the U.S. mortgage market, and we are committed to creating long-term value by helping to build a stable, sustainable housing market for the future,” said Fannie Mae CEO Michael Williams. “We are focused on reducing taxpayer exposure by limiting our credit losses and building a strong new book of business. Our new book of business is now nearly half of our overall single-family book and we expect these new loans will be profitable over their lifetime.” Write to Jon Prior. Follow him on Twitter @JonAPrior.