Fannie Mae Losing Her Ass; Freddie Mac Next
Losing their ass.... Fannie Mae said today it may need to sell more stock or assets to keep shore up capital as losses mount.
Fannie Mae, the largest source of money for U.S. home loans, posted a $3.55 billion loss that was triple analysts' estimates.
Fannie Mae also increased its estimates for future credit losses and said home prices will fall more than its previous forecast.
Just a few of the low lights.... Fannies 2007 loss $2.1 billion vs 2006 profit $4.1 billion.
Net interest income declined 32% to $4.6 billion in 2007 vs $6.8 billion in 2006, a $2.2 billion decrease driven by higher relative borrowing costs.
The value of derivative contracts dropped to $3.2 billion from $7.3 billion for a loss of $4.1 billion, vs. $1.5 billion in 2006...
due to the impact of declining yields on the interest rate swaps used to hedge net assets.
Credit-related expenses including incremental additions to the allowance for loan losses and the reserve for guaranty losses...
climbed 238% or $2.9 billion, to $5.0 billion or 638% vs. $783 million in 2006.
Combined loss allowance increased 300% to $3.4 billion vs $859 million in 2006.
Taking off their caps and dropping reserves... By reporting today, Fannie met a requirement which will allow them to lend out more money...
On March 1st, Office of Federal Housing Enterprise (OFHEO) Oversight is going to remove portfolio growth caps on both Fannie Mae & Freddie Mac.
OFHEO on Sept. 19 raised the portfolio limit at each company to $735 billion for Q3 and granted a 2% increase over the next year.
There is also the possibility of a gradual decreasing of the current 30% OFHEO directed capital requirement.
This means Fannie & Freddie can lend out more money and have lower reserves,
just in time for all those jumbo liar loans that the banks will be dumping on Fannie & Freddie as a result of the loan limit increase in the "economic stimulus" bill.
AKA "The Great Wall Street Banking Bailout & White Collar Real Estate Speculators Welfare & Enablement Bill"...
Simply brillant....
The portfolio lending cap comes off just in time considering tomorrow Freddie will also report a record loss.
FHLMC had a Q3 loss of $2.02 billion and $480 million in the year-earlier Q4.
After its Q3 loss of $1.4 billion, in order to bolster reserves, FNMA sold its preferred shares in December.
As of Dec 31st, the company's $724 billion portfolio was $18 billion below its cap.
Meaning in order to lend out the $18 billion, Fannie probably needs to raise $15 billion.
Fannie Mae, the largest source of money for U.S. home loans, posted a $3.55 billion loss that was triple analysts' estimates.
Fannie Mae also increased its estimates for future credit losses and said home prices will fall more than its previous forecast.
Just a few of the low lights.... Fannies 2007 loss $2.1 billion vs 2006 profit $4.1 billion.
Net interest income declined 32% to $4.6 billion in 2007 vs $6.8 billion in 2006, a $2.2 billion decrease driven by higher relative borrowing costs.
The value of derivative contracts dropped to $3.2 billion from $7.3 billion for a loss of $4.1 billion, vs. $1.5 billion in 2006...
due to the impact of declining yields on the interest rate swaps used to hedge net assets.
Credit-related expenses including incremental additions to the allowance for loan losses and the reserve for guaranty losses...
climbed 238% or $2.9 billion, to $5.0 billion or 638% vs. $783 million in 2006.
Combined loss allowance increased 300% to $3.4 billion vs $859 million in 2006.
Taking off their caps and dropping reserves... By reporting today, Fannie met a requirement which will allow them to lend out more money...
On March 1st, Office of Federal Housing Enterprise (OFHEO) Oversight is going to remove portfolio growth caps on both Fannie Mae & Freddie Mac.
OFHEO on Sept. 19 raised the portfolio limit at each company to $735 billion for Q3 and granted a 2% increase over the next year.
There is also the possibility of a gradual decreasing of the current 30% OFHEO directed capital requirement.
This means Fannie & Freddie can lend out more money and have lower reserves,
just in time for all those jumbo liar loans that the banks will be dumping on Fannie & Freddie as a result of the loan limit increase in the "economic stimulus" bill.
AKA "The Great Wall Street Banking Bailout & White Collar Real Estate Speculators Welfare & Enablement Bill"...
Simply brillant....
The portfolio lending cap comes off just in time considering tomorrow Freddie will also report a record loss.
FHLMC had a Q3 loss of $2.02 billion and $480 million in the year-earlier Q4.
After its Q3 loss of $1.4 billion, in order to bolster reserves, FNMA sold its preferred shares in December.
As of Dec 31st, the company's $724 billion portfolio was $18 billion below its cap.
Meaning in order to lend out the $18 billion, Fannie probably needs to raise $15 billion.
Comments