Federal National Mortgage Association or Fannie Mae, one of the biggest government-sponsored mortgage finance companies, has received about $15 billion capital infusion from the Department Treasury.
The financial aid will allow Fannie Mae to continue its program of helping homeowners avoid foreclosure homes following its quarterly loss of $25 billion, for a 2008 total of $58.7 billion.
Fannie Mae is a major funding source for mortgage lenders. The agency plans to use about $15.2 billion from its federal credit line of almost $200 billion to help the mortgage lending industry, especially homeowners who are desperate to save their foreclosure homes. In exchange for the financial aid, the U.S. government will be given preferred shares at Fannie Mae.
For the last quarter of 2008, Fannie Mae reported losses of $25.2 billion, or $4.47 a share. Previous year loss of the company was $3.6 billion. The last quarter 2008 losses was the sixth consecutive period that the company reported a financial loss.
Furthermore, 2008 ended with the value of Fannie Mae’s non-performing loans reaching $119.2 billion, a significant increase from 63.6 billion during the third quarter of last year and about $27.2 billion in 2007.
Fannie Mae predicted that the continuous rise in the number of foreclosure homes would further drive home prices down to 33 percent to 46 percent range, an increase from the 27 percent to 32 percent range it provided in the last quarter of 2008.
For 2009, Fannie Mae predicted that values of foreclosure homes, and the whole of the housing sector for that matter, will decline by 12 percent to 18 percent.
Fannie Mae attributed its financial losses to increasing defaults and number of foreclosure homes in the United States. Year end quarter credit losses and foreclosed properties expenses reached $12 billion, a gain of 30 percent from the third quarter.
Furthermore, the agency’s uncollectible loans or charge-offs increased to 219 percent to $7 billion last year.
According to Fannie Mae, it needs about $16 billion to replace losses it incurred in the last quarter of 2008 and to continue its foreclosure prevention program.
The company claimed that for 2008, it modified about 33,249 loans, completed 11,682 preforeclosure deals and 7,875 repayment programs which go a long way in helping distressed owners of foreclosure homes.
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