Fannie Mae continued its money losing ways in the fourth quarter, posting a net loss of $2.4 billion for the period and $16.9 billion for the year. In 2010 it lost $14 billion.
At yearend the GSE amassed a net worth deficit of $4.6 billion. It reported that its regulator, the Federal Housing Finance Agency, will ask the U.S. Treasury for a $4.571 billion draw to eliminate the hole.
With the latest request, Fannie will owe the Treasury $117 billion, which translates into annualized dividend payments to the government of $11.7 billion.
It blamed its problems on delinquencies tied to its legacy book of business, tardy repurchase request damage payments by some of its large seller/servicers (see related story on Bank of America), and losses on derivatives that came about because of declining interest rates.
“These fair value losses on the company's derivatives were offset by fair value gains during 2011 related to its mortgage investments; however, only a portion of these investments is recorded at fair value in its financial statements,” the company reported.
Fannie's management maintains that despite its losses “We continue to build a high-quality new book of business” in both single- and multifamily.
The secondary market agency guaranteed $562.3 billion of single-family loans in 2011, down slightly from $595 billion in the prior year.
The GSE, operating in conservatorship since September 2008, ended the year with a 54% share of the single-family MBS market, up from 49% at yearend 2010.
Despite its control of the market, nearly 80% of its new borrowers have credit scores above 700. The weighted average loan-to-value ratio on its 2011 book of business was 69%.
Fannie Mae reported a loss of $4.5 billion on its single-family business in the fourth quarter compared to a $3.7 billion hit in 3Q. The $4.5 billion loss involved $5.4 billion of credit-related expenses such as loan loss provisions and foreclosed property expenses.
The increase in credit-related expenses was "driven largely by a decline in home prices," Fannie said.
Based on secondary market purchases, the GSE house price index fell 3.2% in 2011, compared to a decline of 4.3% in 2010.
