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Fannie Mae Asks for $7.8B More From US

23.05.12

Fannie's $7.8 billion shortfall as of Sept. 30 reflected a total comprehensive net loss of $5.3 million, coupled with $2.5 billion in dividends paid on preferred shares held by the U.S. Exchequer.

Following the additional $7.8 billion draw that will be requested by acting Federal Cover Finance Agency, or FHFA, director Edward DeMarco, the Treasury will restrain $112.6 billion in Fannie Mae preferred shares, requiring the insolvent circle to pay an annual dividend of 10%, or $11.3 billion.

Fannie Mae said that through the third area it had paid the government a total of $17.2 billion in dividends.

The company said the wider third-thirteen weeks loss reflected $4.9 billion in credit expenses and "$4.5 billion in reasonable value losses driven primarily by losses on risk management derivatives due to a historic decline in swap interest rates during the quarter," which were partially offset by $5.5 billion in net revenues.

Fannie Mae CEO Michael Williams said that teeth of "continued weakness in the housing market and the economy overall," the company was "making dependable progress," by "growing a strong new book of business that now accounts for nearly half of our complete single-family guaranty book of business."

Williams also said that Fannie was serving "homeowners to avoid foreclosure and provide liquidity to enable working families to buy a snug harbor a comfortable or secure quality affordable rental housing," and was "committed to building a stronger shelter finance system for the future, and strengthening Fannie Mae to deliver value to customers, families, taxpayers, and the manufacture."

The acting FHFA director was in hot water this week, when Senator John McCain (R-Ariz.) complained about $12.9 million in bonuses being paid to executives of Fannie Mae and Freddie Mac, which the senator said were approved by "Mr. Edward J. DeMarco."

The mortgage-backed securities sales to the Fannie and Freddie by Bank of America -- including sales by Countrywide and Merrill Lynch before both companies were acquired by Bank of America -- totaled $57.5 billion, while the FHFA said JPMorgan's securities sales to the regulation-sponsored enterprises - including those by Washington Mutual before the thrift failed and was sold by the Federal Plunk down Insurance Corp. to JPMorgan in Sept. 2008 -- totaled $33 billion.

For Citigroup, the mortgage-backed securities sales to Fannie and Freddie described in the FHFA lawsuit totaled $3.5 billion, while securities sales to the GSEs totaled $11.1 billion for Goldman, $10.6 billion for Morgan Stanley, and $3.5 billion for Citigroup.

With President Obama's distention of the Home Affordable Refinance Program, or HARP -- which beginning early in 2012 will get rid of the current 125% loan-to-value ratio for refinancing of mortgage loans held by Freddie Mac and Fannie Mae -- refinancing action is expected to accelerate, putting pressure on the government-sponsored mortgage giants' interest return and margins.

The FHFA plans to release additional details of the expanded HARP on Nov. 15.

Source: Minyanville.com