Fannie Mae Posts $1.3 Billion Loss
By NICK TIMIRAOS
Fannie Mae reported a narrower third-quarter net loss of $1.3 billion and warned that foreclosure delays could lead to higher costs for the mortgage-finance company.
It was the 13th consecutive quarterly loss for Fannie, but was down from the year-earlier net loss of $18.9 billion.
Fannie asked the Treasury Department to provide a $2.5 billion infusion, raising the government's tab for its rescue to $87.6 billion.
Fannie and its smaller sibling, Freddie Mac, have taken more than $150 billion from the U.S. government. The firms must pay the government a 10% dividend on those cash infusions, which means that even once they stop losing money from soured mortgage guarantees, they likely are to continue borrowing money from the government to fund those interest payments.
Fannie Mae paid $2.1 billion in dividends to the government during the quarter.
The loss came during a quarter in which Fannie has had to suspend the foreclosure process in certain states after paperwork errors prompted some mortgage servicers, including units of Bank of America Corp. and J.P. Morgan Chase & Co., to halt repossessions.
"We expect the pause will likely result in higher serious delinquency rates, longer foreclosure timelines and higher foreclosed property expenses," the company said in federal filings Friday.
The delays in the foreclosure process deliver a setback to the housing market, which already was reeling from a plunge in sales activity after home-buyer tax credits expired in the spring.
Fannie and Freddie will face a much steeper climb in putting their losses behind them if job growth and housing prices don't recover. Foreclosure delays will raise costs for the firms because they are taking back more homes through foreclosure. The inability to sell those homes will add to carrying costs, and it also could become more costly to foreclose on borrowers.
Fannie reported a 13% increase in net revenue, to $5.1 billion, during the third quarter. But that was offset by a similar increase in credit losses, which rose 13%, to $5.6 billion. The higher losses were driven by an increase in the costs of acquiring more foreclosed properties.
Fannie held nearly 167,000 properties at the end of September, nearly double its volume at the beginning of the year. The company said it had seen an increase in the share of properties that it can't market for sale, either due to longer redemption periods for homeowners, the fact that properties are still occupied after foreclosure, or because properties are awaiting repairs.
The inability to sell those properties quickly could lead to higher carrying costs.
Write to Nick Timiraos at firstname.lastname@example.org