Fannie Mae Asks For $7.8 Billion More In Federal Aid

By: EW News Desk Team   Date: 9 November 2011

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EW News Desk Team

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09 November 2011

The Federal National Mortgage Association, more commonly known as Fannie Mae, announced on Tuesday that it would require a further $7.8 billion in federal aid from the US Treasury Department in order to stay afloat, after reporting third-quarter losses of up to $5.1 billion.

The government-controlled firm previously reported a net loss of $2.9 billion in the second-quarter of the year and has since seen their losses widen thanks to continued delinquency issues in mortgages that it had purchased or guaranteed before 2009. Worryingly, this was also the 16th loss in the past 17 quarters for the company, which has been kept on government life-support ever since the housing bubble burst more than 3 years ago.

"Our results in the third quarter were significantly affected by continued weakness in the housing market and the economy overall," said Fannie Mae’s chief executive Michael J. Williams in a statement, as quoted by the Wall Street Journal.

"There is certainly a lot of pre-2009 loans that we need to work through and that is certainly driving the credit losses you saw in this quarter and over the last several years," added Fannie Mae’s Chief Financial Officer Susan McFarland in an in interview with Reuters.

Fannie Mae, according to McFarland, was presently "working to reduce losses" on the legacy loans from pre-2009, while doing their best to "limit taxpayer exposure.”

The numbers, however, do not paint a pretty picture for the US taxpayer.

Assuming its latest request is approved, Fannie Mae would have drawn out a total of $112.6 billion in bailout funds from the Treasury Department since being seized by the government in 2008. This will also mean that the company would be required to pay an annualized dividend payment of $11.3 billion to the government and its taxpayers, more than the company has ever earned in annual net income.

Just last week, Fannie Mae’s twin company, Freddie Mac, requested an additional $6 billion in bailout funds from the government after reporting a quarterly loss of $4.4 billion. In total, both Fannie Mae and Freddie Mac have taken a combined sum of $185 billion in bailout funds, while returning about $32 billion.

Given that both companies play a crucial role in US housing finance, owning or guaranteeing about half of all mortgages, the US government has pledged unlimited funds to keep the firms afloat through the end of 2012.


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