Mortgage financier Fannie Mae reported a first quarter loss of $2.2 billion, significantly wider than the $2.02 billion loss expected by analysts polled by Reuters, but lower than the company’s $3.6 billion fourth quarter loss.
A year earlier, the company reported net income of $961 million, or $0.85 per share.
The loss was attributed to $4.4 billion in mark-to-market fair value losses, up from $3.4 billion in the fourth quarter, and $3.2 billion in credit loss provisions as national home prices continued to fall.
Fannie also boosted its loan loss reserves to $5.2 billion as of March 31, up from $3.4 billion as of December 31 to reflect losses expected to be recorded over time in charge-offs.
CEO Daniel Mudd blamed the loss on credit spreads that rose to a 22-year high during the first quarter, along with a volatile secondary market and stagnating home prices.
The company’s total mortgage credit book of business grew by three percent during the quarter to $3 trillion, up from $2.9 trillion a quarter earlier and estimated market share increased to nearly half of all new single-family mortgage-related securities issued.
Net revenue climbed to $3.8 billion from $3.1 billion in the fourth quarter, thanks to a $131 million increase in guaranty fee income and $554 million increase in net interest income.
Fannie Mae also plans to raise $6 billion in new capital via a public offering of common and preferred stock.
Proceeds from the sale will be used to help the company maintain a strong balance sheet and provide support for the ailing secondary mortgage market.
The company also said it would cut its common stock dividend to 25 cents beginning in the third quarter to free up an estimated $390 million annually.
Keys to Recovery
Additionally, Fannie plans to announce a series of initiatives to help keep more borrowers in their homes as the mortgage crisis continues onward.
These include a new refinance option for current but underwater homeowners that will allow financing up to 120 percent of the property value, first-time homebuyer assistance, flat pricing on jumbo conforming loans, and rent-to-own foreclosed home loan programs for hard-hit communities.
Shares of Fannie Mae were up $2.19, or 7.74%, to $30.48 in afternoon trading on Wall Street.