Fannie seeks another $10.7b in US aid
WASHINGTON - Fannie Mae plans to tap nearly $11 billion in new government aid after posting another massive quarterly loss as the taxpayer bill from the housing market bust keeps growing.
The mounting price tag for the rescue of Fannie and its government-sponsored sibling, Freddie Mac, is surpassed only by that of insurer American International Group, which has received $182.5 billion from the government.
Fannie Mae’s new request for $10.7 billion from the Treasury will bring the total for Fannie and Freddie to nearly $96 billion. Freddie is expected to report its quarterly results today.
The government has pledged up to $400 billion in aid for the two companies, which play a vital role in the mortgage market by purchasing loans from banks and selling them to investors. They have been under government control since September, when their near-collapse helped set off the financial crisis.
Together, Fannie and Freddie own or guarantee almost 31 million home loans worth about $5.4 trillion - about half of all US home mortgages.
With assets of that size, “it’s hard for their problems to be small,’’ said Karen Shaw Petrou, managing partner at Federal Financial Analytics, a consulting firm that advises financial institutions.
Fannie Mae posted a second-quarter loss of $15.2 billion, or $2.67 per share, including $411 million in dividend payouts. That compares with a loss of $2.6 billion, or $2.54 per share, a year ago period.
The results were driven by $18.8 billion in credit losses due to declining housing market conditions, made worse by rising unemployment.
Nearly 4 percent of the loans Fannie Mae owns or guarantees were delinquent as of June 30, up from 1.4 percent a year earlier.
The two companies lowered their standards for borrowers during the real estate boom and are reeling from the bust.
High-risk loans, now defaulting at a record pace, have come back to haunt the companies. Worse still, the recession is causing formerly reliable homeowners with good credit to default.