Fannie Reports Plunge in '06 Earnings

Fannie Mae reported 2006 earnings of $4.1 billion, down from $6.3 billion in the prior year, due to a 41% drop in net interest income and a 22% drop in the profitability of its single-family business.The mortgage giant said net income from the single-family business fell to $2.04 billion last year, despite an increase in revenues. Fannie attributed the drop-off in profitability to a $308 million increase in losses on single-family guaranty contracts, a $533 million increase in administrative costs, a $123 million increase in loan loss reserves, and a $218 million increase in foreclosure expenses. "We anticipate the losses we incur at inception of guaranty contracts will more than double in 2007 compared to 2006, primarily as a result of the decline in home prices, as well as continued investment in loans that support the company's housing goals," the government-sponsored enterprise said. Fannie executives also affirmed that the publicly traded company will file its 2007 annual report by the end of February 2008, which would be in compliance with the Securities and Exchange Commission's filing deadline. The GSE can be found online at http://www.fanniemae.com.