.4 billion from the government to stay afloat. For several years, Fannie Mae has been under government conservatorship. They have lost cash for 12 consecutive quarters. Either the fast cash from taxpayers did no good, or they’re in deeper trouble than once believed.
Fannie Mae operated at a loss for the last 12 quarters
For the 12th consecutive quarter, Fannie Mae has posted a loss. They have lost $ 148 billion in that time period. That’s almost the exact same amount as the entire economy of Chile. Though Wall Street has somewhat recovered by now, Fannie Mae and Freddie Mac are still in trouble. The losses posted by Fannie Mae for this quarter, as outlined by the Wall Street Journal, are only $ 11.5 billion, compared with first quarter of last year, which saw a loss of $ 23.
Fannie Mae under conservatorship
In 2008, as the housing recession threatened to collapse the entire U.S. financial system, and as a consequence, Fannie Mae and Freddie Mac went into conservatorship. Essentially, they were seized by the Federal government because they couldn’t stop losing money. Because Fannie Mae had assumed the risk for so numerous mortgages, as the numbers of defaults rose, so did the company’s losses. A recent article on CNN Money reports the rate of foreclosure has slowed in some areas, but nevertheless managed to rise by 16 percent.
Fallout
Fannie Mae and main rival Freddie Mac are huge mortgage lenders within the U.S. and they hold trillions in mortgage assets. Some of those assets have become toxic. Mortgage loan modification will only do so much good, and if a mortgage becomes underwater, the homeowner and also the bank lose cash. If the trend of real estate losing value and massive foreclosures doesn’t reverse course, getting a mortgage loan will be difficult for anybody.
The silver lining
According to the exact same piece within the Journal, Fannie reported that 5.47 percent of their mortgages were 90 days past due in March. February had 59 percent. These are modest gains beginning to take place. That said, the question is how long before small gains add up to a good direction.
Article resources
Wall Street Journal
http://online.wsj.com/article/SB10001424052748703880304575236030191182938.html?mod=WSJ_Commodities_RIGHTMoreInMarkets
CNN Money
http://money.cnn.com/2010/04/29/real_estate/worst_foreclosure_markets/index.htm
