US mortgage finance giant Fannie Mae posts US$29b loss
Posted: 10 November 2008 2337 hrs

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WASHINGTON: Fannie Mae, the US mortgage finance giant bailed out by the government, reported on Monday a third-quarter loss of 28.99 billion dollars due to the slump in the real estate sector.

The loss amounted to 13.00 dollars per share, compared with a second-quarter loss of 2.3 billion dollar loss, or 2.54 dollars per share.

The hefty third-quarter loss was driven mainly by a 21.4 billion dollar write-down of deferred tax assets and 9.2 billion dollars in new provisions for credit losses.

Net income rose 14.5 percent over the second quarter to 2.4 billion dollars, a rise the company attributed to a decline in short-term borrowing rates, reducing the cost of the company's debt.

Fannie said that its total non-performing assets including both loans and foreclosed properties had jumped to 71.0 billion dollars, or 2.4 percent of its total loan-related assets, compared with 52.0 billion, or 1.8 percent, on June 30.

The company and its sister mortgage titan Freddie Mac were seized by the US government on September 7 to avert a financial system meltdown from a credit crunch and housing slump.

The two government-sponsored enterprises, owned by shareholders, underpin about half of the US home-loan market.

Fannie Mae said the huge third-quarter loss mainly arose from a non-cash charge related to providing an allowance against deferred tax credits which would be used to help minimise taxes on profits in the future. The company said it does not expect to generate taxable income in the near future that would allow it to benefit from the deferred tax assets.

Investment losses nearly doubled, hitting 1.6 billion dollars against 883 million the previous period. The losses mostly stemmed from securities backed by low-quality and sub-prime mortgages.

Under the government rescue plan, the government replaced the companies' chief executives and the US Treasury announced it would inject up to 100 billion dollars in each.

Fannie Mae suggested it had not yet availed itself of the government funds by the quarter's end on September 30.

But, it said, "If current trends in the housing and financial markets continue or worsen, and we have a significant net loss in the fourth quarter of 2008, we may have a negative net worth as of December 31, 2008."

In that case, it said, the company would be required to obtain funding from the Treasury in order to avoid being forced into receivership. - AFP/de