Fannie Mae reported a net loss of $1.2 billion in the second quarter — excluding premiums paid to the U.S. Treasury — a sizeable improvement from 1Q when it bled $11.5 billion of red ink.
Operating under a federal conservatorship, the GSE is asking Treasury for $1.5 billion in assistance to keep its net worth position in the black.
Fannie said lower credit-related expenses and higher revenues contributed to the turnaround. However, credit losses related to charge-offs and foreclosures increased to $7 billion from $5.1 billion in the first quarter.
The company said almost all of the credit losses are related to single-family loans it purchased or guaranteed between 2005 to 2008. It noted that the firm has reserved for a "substantial majority" of those losses.
Over the past two years Fannie has raised its underwriting standards, which is reflected in the low early default rates on its 2009 and 2010 books of business. "We are focused on sustainable homeownership and our higher underwriting and eligibility standards reflect that," said Fannie CEO Mike Williams.
The 2Q earnings report shows that revenues totaled $4.5 billion, compared to $3 billion in the first quarter. Credit-related expenses came in at $4.9 billion, down from $11.9 billion in the previous year.
In 1Q Treasury provided Fannie $8.4 billion to cover its first quarter loss and eliminate the company's net worth deficit.
