While bailed-out banks and car companies are making headway toward repaying their loans in full, it’s a completely different story for mortgage investment firm Fannie Mae. After posting a quarterly loss of $11.5 billion, Fannie Mae has announced it will need another $8.4 billion from its federal overseers government aid.
This is the 12th consecutive quarterly loss of Fannie Mae, which alongside rival Freddie Mac was put under federal conservatorship in 2008. But if there’s a silver lining to be found here, the $11.5 billion is less than half the loss — $23.5 billion — from the same quarter in 2009.
With the additional $8.4 billion, Fannie Mae will now owe the feds $84 billion.
The major reason Fannie and Freddie continue to bleed money is that, unlike other bailed-out businesses that have assets or entire divisions that could be sold off for quick cash, these two are solely in the still-flailing business of home loans. According to the Wall Street Journal, Fannie and Freddie hold almost $5.5 trillion in mortgages and loan guarantees.
Writes the WSJ:
Despite their massive losses, the firms are helping to stabilize the housing market. Fannie, Freddie and the Federal Housing Administration provided guarantees or insurance for 96.5% of home mortgages originated in the first quarter, according to Inside Mortgage Finance, a trade publication. The companies also play a central role in the Obama administration’s loan-modification effort designed to avert foreclosures.
One possible signal that losses will slow in the coming months: Fannie said that 5.47% of its loans were 90 days or more past due at the end of March, down from 5.59% in February and the first monthly decline in nearly three years.