Fannie Mae Loss Doubles in Third Quarter

November 9, 2007 No Comments »

Fannie Mae, the largest U.S. mortgage financier, said its third-quarter net loss widened to $1.52 billion from $760 million a year ago, as falling home prices and credit concerns dragged down the value of mortgage securities.

“This is a tough year for our industry, and Fannie Mae is not immune to the challenges facing the mortgage markets. Our results reflect that,” Daniel Mudd, the company’s chief executive officer, said in a statement.

The government-sponsored company lost $1.56 a share in the third quarter, compared to 79 cents per share a year earlier.

For the first three quarters of the year, the company said it earned just $1.17 a share, down from $3.16 a share, or $3.45 billion, in the same period last year.

Fannie said that it had increased its provision for credit losses by $1.6 billion to $2 billion for the first three quarters of 2007.

The results, while negative, mark the first time Fannie Mae has been current in its financial reporting since 2004, when accounting irregularities rocked the company’s reputation.

“While we’re pleased to have current results, they arrive in the midst of one of the most challenging mortgage and housing markets in recent history,” Mudd added.

Fannie also warned that it expects the housing downturn to continue into 2008, reducing home prices by 4 percent and further decreasing the demand for mortgage financing.

Shares of Fannie Mae were down $2.80, or 5.62%, to $47, their lowest point in over 52-weeks in late trading Friday.

Fannie Mae shares have dropped more than 13% during the week, their biggest decline in more than three years, while shares of Freddie Mac dropped about 16.5% throughout the week.

Both government-sponsored entities are hoping for a sizable portfolio cap increase which would allow the financiers to hold more mortgages, though such demands have been met with resistance by both the Bush Administration and the Fed.

The Office of Federal Housing Enterprise Oversight currently has the portfolio cap for both companies set at $735 billion.

Earlier this week, Fed Chief Ben Bernanke proposed that the federal government guarantee home loans worth up to $1 million in a bid to make jumbo loan financing more readily available, though the move would be temporary.

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