Fannie Mae Records $5.1B Loss For The Quarter

Fannie Mae suffered a net loss of $5.1 billion in the third quarter, compared to a second-quarter loss of $2.9 billion, the company announced Tuesday. The Federal Housing Finance Agency (FHFA), in its role as government-sponsored enterprise (GSE) conservator, will in turn request a Treasury draw of $7.8 billion on Fannie Mae's behalf.

Including that latest draw, the company's total obligation to the Treasury for its senior preferred stock will be $112.6 billion.

In a press statement, Fannie Mae said its third-quarter loss was largely tied to $4.9 billion in credit-related expenses (the majority of which were related to the company's pre-2009 book of business) and $4.5 billion in fair value losses. Those losses were driven primarily by losses on risk management derivatives due to a significant decline in swap interest rates last quarter, the company said. The losses were partially offset by $5.5 billion in net revenues.

"Our results in the third quarter were significantly affected by continued weakness in the housing market and the economy overall," Fannie Mae CEO Michael J. Williams said. "Despite these challenges, we are making solid progress. We are growing a strong new book of business that now accounts for nearly half of our overall single-family guaranty book of business."

Last week, Fannie Mae's government-sponsored sibling, Freddie Mac, reported a third-quarter loss of $4.4 billion. The FHFA said it will request a $6 billion draw from the Treasury on the company's behalf.

In the Fannie Mae statement, Susan McFarland, executive vice president and chief financial officer, said efforts like the GSEs' Servicing Alignment Initiative (SAI) aim to curb losses on Fannie Mae's legacy book.

‘Our goal is to get to borrowers early in the delinquency process and to find a solution that fits their needs," McFarland said of the SAI. "We believe these standards are good for the borrower, good for the industry and good for our company.’

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