Fannie Takes $3.6B 4Q Loss

Fannie Mae has reported a $3.6 billion loss for the fourth quarter and a $2.1 billion loss for 2007, recognizing for the first time a loss on its subprime and alternative-A private-label securities totaling $1.35 billion. The unrealized losses on the $41.4 billion in subprime private-label securities and $32.5 billion in alt-A private-label securities totaled $3.3 billion, the government-sponsored enterprise said in its 2007 annual financial report. Fannie increased its loan loss reserves by $2 billion, and the GSE became more pessimistic in its housing market outlook. The company said it expects house prices to decline 5%-7% this year and projected that its credit loss ratio will be 11-15 basis points. Fannie reported that its single-family guarantee fee income rose 19% in 2007 to $5.1 billion, up from $4.3 billion the previous year, which reflected higher demand for loan guarantees and higher fees. "While we are pleased that demand for our mortgage guaranty businesses has surged as we respond to the market's urgent need for liquidity and stability, this positive trend has been far outweighed by the negative financial impacts of rising defaults, falling house prices, and extraordinary disruptions in the credit markets," Fannie president and chief executive Daniel Mudd said. The GSE can be found online at http://www.fanniemae.com.