Fannie Mae has reported a net loss of $2.3 billion, or $2.54 per diluted share, in the second quarter of 2008, compared with a first-quarter 2008 net loss of $2.2Â billion, or $2.57 per diluted share.Â Results were driven primarily by an increase in the provision for credit losses that more than offset higher revenue and fair value gains, the company says.
‘Our second quarter results reflect challenging conditions in the housing and mortgage markets that began in 2006 and have deepened through 2007 and 2008,’ notes Daniel H. Mudd, president and chief executive officer. ‘Fannie Mae is providing stability and liquidity to the housing market in the United States, and we will continue to play a key role as the market recovers from this cycle.’
In response, Fannie Mae has taken several actions, including reducing the common stock dividend from $0.35 per share to $0.05 per share, effective for the third quarter, to preserve $1.9 billion in capital through 2009; reducing annual operating costs 10% by year-end 2009; increasing guaranty fees, including a 25 basis point increase in its adverse market delivery charge; and managing the balance sheet to ensure the most efficient use of capital.
Providing market liquidity will be the priority for portfolio activities, and purchases will be concentrated in high-spread assets to generate the maximum amount of revenue per dollar of risk capital, Fannie says. As a result, the company expects to balance profitable portfolio growth opportunities in the near term with prudent capital conservation through the current housing cycle.
Source: Fannie Mae