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Fannie Mae posts 4Q loss of nearly $3.6 billion as loan delinquencies mounted

Fannie Mae posts 4Q loss of nearly $3.6 billion as loan delinquencies mounted

Fannie Mae on Wednesday said it lost nearly $3.6 billion (euro2.39 billion) in the fourth quarter of 2007 as home-loan delinquencies mounted and the company preserved cash in anticipation of further losses.
The quarterly loss at Fannie, the largest U.S. buyer and backer of home loans, contrasts with a profit of $604 million (euro401.49 million) in the same period a year earlier.
Fannie's $3.56 billion (euro2.37 billion) fourth-quarter loss was equivalent to $3.80 (euro2.53) a share. It earned 49 cents a share a year earlier. Thomson Financial said Wall Street analysts had expected the company to lose $1.24 (euro.82) a share in the latest period.
The government-sponsored company was forced to set aside billions to account for bad loans. Its results clearly showed the ravages of the mortgage-market turmoil that began last spring and rattled the economy.
Because Fannie customarily buys more solid mortgages as opposed to the high-risk subprime loans that have mushroomed into default, the latest losses show how pervasive the mortgage crisis has become.
The company's loss for all of 2007 was $2.05 billion (euro1.36 billion), or $2.63 (euro1.75) a share, compared with a profit of $4.05 billion (euro2.69 billion), or $3.65 (euro2.43) a share, in 2006.
"We are working through the toughest housing and mortgage markets in a generation," the company's president and CEO, Daniel Mudd, said in a statement. He said the company's losses reflected "the significant decline in home prices in a number of large regional markets and the growing number of borrowers struggling with their mortgages."
Mudd called 2008 "another tough year." Washington-based Fannie expects to lose money this year on eight to 10 of every 1,000 mortgages held on its $2.4 trillion (euro1.6 trillion) book _ a steep increase from four to six in 2007.
In addition to having to set aside an additional $2 billion (euro1.33 billion) in the fourth quarter for soured loans, Fannie also saw its profits eroded by $3.2 billion (euro2.13 billion) in losses from derivatives, the complex financial instruments it uses to hedge against swings in interest rates.


Updated : 2020-12-05 11:34 GMT+08:00