Fannie Mae Requests $7.8B From Taxpayers to Cover Q3 Deficit

The nation's largest mortgage company says it lost $5.1 billion during the third quarter of this year.

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That combined with a $2.5 billion dividend payment to Treasury for past bailout money left ""Fannie Mae"":http://www.fanniemae.com with a net worth deficit of $7.8 billion at the end of September.

The ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA) is petitioning Treasury for another capital injection for that exact amount to eliminate the GSE's shortfall.

Upon receipt of those funds, Fannie Mae’s total debt obligation to U.S. taxpayers will be $112.6 billion. Under terms of the conservatorship, that amount will require the GSE to make an annualized dividend payment of $11.3 billion.

The D.C.-based GSE’s ""latest financial results"":http://www.fanniemae.com/resources/file/aboutus/media/q32011_release.pdf indicate losses are widening. Fannie’s net loss of $5.1 billion in the third quarter of 2011 compares to a loss of $2.9 billion in the second quarter of this year and a loss of $1.3 billion in the third quarter of last year.

The company says its loss last quarter was driven primarily by two factors: $4.9 billion in credit-related expenses, the majority of which were related to its legacy (pre-2009) book of business; and $4.5 billion in fair value losses on derivatives. These losses were partially offset by $5.5 billion in net revenues.

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Fannie Mae notes that the decline in interest rates over the third quarter had a significant impact on the company’s derivative losses.

The GSE held 122,616 single-family REO properties as of the end of September. Its inventory narrowed from 135,719 at June month-end, as REO dispositions outpaced repossessions over the most recent quarter.

Fannie Mae acquired 45,194 single-family REOs through foreclosure during the July-to-September timeframe, versus 58,297 REO sales over the same period. Both repossessions and sales were down from the prior quarter.

The carrying value of the company’s REO inventory was $11.0 billion as of September 30, compared with $12.5 billion as of June 30. The GSE’s credit-related losses and foreclosure expenses also fell, from $6.1 billion in the second quarter to $4.9 billion in the third.

Fannie Mae says the changing foreclosure environment “has significantly lengthened” the time it takes to foreclose on a mortgage loan in many states, which has slowed the pace of its REO property acquisitions and increased credit-related expenses.

“Fannie Mae believes these changes in the foreclosure environment will delay the recovery of the housing market because it will take longer to clear the housing market’s supply of distressed homes, which typically sell at a discount to non-distressed homes and therefore negatively affect overall home prices,” the GSE said.

Fannie Mae’s single-family serious delinquency rate stood at 4.00 percent at the end of September. The rate has decreased each quarter since the first quarter of 2010.

The GSE attributes the decline in part to its acquisition of higher-quality loans since the beginning of 2009, but says it’s primarily the result of foreclosure prevention efforts.

During the third quarter of 2011, Fannie Mae completed 60,025 permanent loan modifications and 8,202 repayment plans and forbearance agreements. Short sales and deeds-in-lieu totaled 19,306 during the quarter.