Friday, May 06, 2011

Fannie Mae Posts Deep Loss

Fannie Mae Posts Deep Loss

Michael Baron
05/06/11 - 07:27 PM EDT

NEW YORK (TheStreet) -- Fannie Mae(FNMA) swung back to a multi-billion dollar loss in the first quarter late Friday and gave a guarded outlook for the housing market.

The government-sponsored mortgage lender said it lost $8.7 billion, or $1.52 a share, in the three months ended in March, narrower than its massive year-ago loss of $13.1 billion, or $2.29 a share, in the same period a year earlier.

The latest quarter reflects the payment of $2.2 billion worth of preferred stock dividends to the U.S. Treasury. In the fourth quarter ended in December, the company reported net income of $73 million, before the payment of the Treasury's $2.2 billion in preferred dividends.

In its commentary, Fannie Mae said it continues to see elevated delinquency rates for single-family home loans because of the weak economic environment, as evidenced by "sustained weakness in the housing market and high unemployment."

Credit-related expenses swelled to $11 billion in the latest quarter from $4.8 billion in the fourth quarter, although that was still down from $11.9 billion in the year-ago first quarter.

"We expect our credit-related expenses to remain elevated in 2011 as we continue to be negatively impacted by the prolonged decline in home prices," said Michael Williams, the company's president and CEO, in a statement. "As we move forward, we are building a strong new book of business that now accounts for 45 percent of the company's overall single-family guaranty book of business.

Williams continued: "We continue to be the leading provider of liquidity for single-family mortgages and affordable multifamily rental housing while we remain focused on our responsibility to find solutions for distressed homeowners and their families."

Fannie Mae also revealed it's seeking an additional $8.5 billion from the government to compensate for a deficit in its net worth.

"The Federal Housing Finance Agency (FHFA) has requested $8.5 billion on the company's behalf from Treasury to eliminate the deficit," the company. "Upon receipt of those funds, the company's total obligation to Treasury for its senior preferred stock will be $99.7 billion. Since its senior preferred stock was issued, the company has paid a total of $12.4 billion in dividends to Treasury."

Fannie Mae shares closed Friday's regular session at 43 cents, down 9%.

--Written by Michael Baron in New York.

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