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November 6, 2009

Fannie Loses $18.8 Billion in Quarter

Fannie Mae posted yet another stunning loss in the third quarter, $18.8 billion, noting that it now owns or guarantees close to $200 billion in nonperforming assets. The steep loss resulted in the government-controlled GSE having a net worth deficit of $15 billion at the end of September. In tandem with the loss, its regulator has asked the Treasury Department for $15 billion to bring the GSE's net worth above zero. Over the past five quarters Fannie has lost $85 billion. In a new filing with the Securities and Exchange Commission, Fannie offered a slight glimmer of hope for the future: its guarantee fee income rose 12% in the quarter to $1.9 billion (compared to the second quarter). It also predicts that "absent further economic deterioration" its credit-related expenses will be less in 2010 than this year. With 3Q under its belt, Fannie now has combined credit loss reserves of $65.9 billion. Its credit book of business now stands at $3.23 trillion. Fannie Mae and its sister company, Freddie Mac, were taken over by the government in September 2008 and placed into separate conservatorships.