Mortgage giant Fannie Mae just announced record losses, and the company is asking for another $8.4 billion from the government to stay afloat. Fannie Mae has been in conservatorship — or possessed by the federal government — for some time. Its losses have grown almost exponentially, and have posted the 12th consecutive quarterly loss. Clearly, any fast cash from the taxpayers to prop up the mortgage house has not been put to good use, and this ship is sinking fast.
Fannie Mae posts 12th consecutive loss
For the 12th consecutive quarter, Fannie Mae has posted a loss. Not only that, but the mortgage financing giant has seen about $148 billion go down the drain over that time. That’s almost the entire GDP of Chile. Though it may seem the effects of the housing recession and bailouts are already forgotten by Wall Street, Fannie Mae and Freddie Mac are still troubled. The losses posted by Fannie Mae for this quarter, according to the Wall Street Journal, are only $11.5 billion, contrasted to first quarter 2009 losses of $23.5 billion.
Fannie Mae under conservatorship
In 2008, as the housing recession threatened to collapse the entire U.S. financial system, Fannie Mae and Freddie Mac were both placed in conservatorship. Essentially, they were seized by the Federal government because they couldn’t stop losing money. Because Fannie Mae had assumed the risk for so many mortgages, as the numbers of defaults rose, so did the company’s losses. A recent article on CNN Money reports that the rate of foreclosure has slowed in some areas, but still managed to rise by 16 percent.
Fannie Mae and main rival Freddie Mac are huge mortgage lenders in the U.S., and they hold trillions in mortgage assets. Portions of those assets have become toxic. Mortgage loan modification will only do so much good, and if a mortgage becomes underwater, the homeowner and the bank lose money. If the trend of real estate losing value and massive foreclosures doesn’t reverse course, getting a mortgage loan will be difficult for anyone.
The silver lining
According to the same piece in the Journal, Fannie reported that 5.47 percent of its loans were 90 days past due in March. In February, it had been 5.59 percent. This means some modest improvements are beginning to happen. However, the question becomes how long before small improvements add up to a positive direction for the real estate market overall.