Fannie Says It May Need Help From Treasury Amid Deep Loss

RDX : 标准的Big Bath 本来没事 但是最怕的就是 党和人民的钱还没到 自己就把自己洗没了

Fannie Mae, hit by growing home-mortgage defaults and falling home prices, reported a $29 billion loss for the third quarter and said it may need a cash infusion from the U.S. Treasury by year end.

The biggest factor in Fannie's loss was a $21.4 billion charge to reflect the likelihood that the company won't be able to make use of tax credits that were listed on its balance sheet as assets. Fannie said it had concluded as of Sept. 30 that "it was more likely than not" that it won't produce enough taxable income in future quarters to realize the full value of those tax assets. Critics had long argued that Fannie would have to write down those assets.

Fannie also had $9.2 billion in credit-related expenses, including losses on foreclosures and provisions for future losses.

Federal regulators in early September took control of the management of Fannie and its main rival, Freddie Mac, under a legal process known as conservatorship, citing the risk that default-related losses would wipe out their thin layers of capital. At the time, Treasury pledged to provide as much as $100billion of capital to each company if needed.

Fannie said its net worth, or assets less liabilities, totaled $9.4 billion as of Sept. 30, down from $41.4billion three months earlier. To remain in business, Fannie would need funding from Treasury if its net worth fell below zero. Fannie said that may happen "if current trends in the housing and financial markets continue to worsen."

Fannie's loss for the latest quarter worked out to $13 per share. A year earlier, Fannie surprised investors with what then seemed like a whopping loss of $1.4 billion, or $1.56 a share.

Fannie and Freddie are still owned by private-sector shareholders, but Treasury, in return for agreeing to provide capital if needed, in September obtained warrants allowing it to acquire stakes of 79.9% in the companies for a nominal sum. Because of expectations that there will be little value left for other shareholders, the companies' share prices have collapsed in recent months. Midday Monday, Fannie shares were trading at 75 cents apiece, down from a 52-week intraday high of $50.44 Nov. 14, 2007. Freddie Mac shares were at 88 cents midday Monday, down from a 52-week intraday high of $45.85, also on Nov. 14, 2007.

Freddie hasn't set a date for releasing third-quarter results, a spokesman said.

Fannie and Freddie are the biggest providers of funding for U.S. home mortgages. The government-backed companies buy home loans from lenders and bundle them into securities, many of which are sold to other investors. Fannie and Freddie collect fees for guaranteeing that payments will be made on those loans, and take losses when defaults occur. As Fannie and Freddie have faltered in recent months, a rapidly growing share of U.S. mortgage lending is being insured by the Federal Housing Administration, which insures lenders against the risk of default on loans that meet FHA standards.

Fannie is struggling to sell foreclosed homes as prices on them drop. Its inventory of single-family foreclosed homes on Sept. 30 was 67,519, up from 54,173 three months earlier and 33,729 at the end of 2007. Net sales prices for foreclosed homes fell to 70% of the unpaid loan balance in the latest quarter from 78% in 2007 as a whole.

More and more borrowers are falling behind as job losses prevent some from paying and falling home values discourage others from trying. At the end of the latest quarter, overdue loans totaled $63.6 billion, or 2.2% of mortgages guaranteed by Fannie, up from 1.6% as of June 30.

During the housing boom, Fannie and Freddie avoided some of the worst excesses of lax lending to subprime borrowers, or those with poor credit histories. But both companies, seeking to regain market share, lowered their standards in 2006 and 2007, particularly on Alt-A loans, or those to borrowers who don't fully document their incomes. Alt-A loans made up 10% of Fannie's single-family-home loan book as of Sept. 30 but accounted for 48% of credit losses in the latest quarter. Fannie and Freddie also were big buyers of securities created by Wall Street firms and backed by dubious subprime and Alt-A loans.

California accounted for about 31% of Fannie's single-family credit losses in the third quarter, while Michigan accounted for 11%, Florida for 10% and Arizona for 9%. About 4.4% of single-family loans backed by Fannie in Florida were 90 or more days overdue.

Write to James R. Hagerty at bob.hagerty@wsj.com and Aparajita Saha-Bubna at aparajita.saha-bubna@dowjones.com