Fannie Sees No Revenue Boost in 2nd Half

Despite raising its loan fees and pricing several times this year, Fannie Mae says it does not expect to see an increase in revenues in the second half and is beginning to see the Federal Housing Administration take away some of its business. "To date we continue to serve about 45% to 50% of the market -- and we have begun to see some of that market we've previously served move over to FHA," said Fannie executive vice president Thomas Lund. Fannie Mae reported $4 billion in revenues for the second quarter but took $5.3 billion in credit-related expenses, including $3.7 billion loan loss provisions and $1.3 billion in actual credit losses (see above item). Fannie executives told investors and equity analysts that they expect credit-related expenses to accelerate in the second half, especially provisions for loan losses. Due to higher defaults and falling housing prices, Fannie said it expects a 23-to-26-basis-point credit loss ratio in the second half, compared with an annualized 15-bp credit loss ratio in the first half. Despite these headwinds, Fannie executives told analysts that they are comfortable with Fannie's current capital position for the rest of 2008 and that there are no plans to tap Treasury for a line of credit, which Congress recently increased.