Fannie Mae seeks $8.4 billion from government after loss
WASHINGTON/NEW YORK (Reuters) - Fannie Mae, the largest U.S. residential mortgage funds provider, on Monday asked the government for an additional $8.4 billion after the company lost $13.1 billion in the first quarter.
Including the latest request, Fannie Mae will have received more than $84.6 billion from the government, and the firm said it saw no end in sight to federal assistance.
The announcement comes less than a week after smaller mortgage finance company Freddie Mac, said it would need $10.6 billion in government funds after losing $8 billion in the first quarter.
The U.S. Treasury took control of the two entities at the height of the financial crisis in 2008 as mortgage losses mounted. The two firms have now tapped more than $145 billion in assistance from Uncle Sam's unlimited credit line.
Housing analyst Rajiv Setia of Barclays Capital said Fannie Mae is likely to draw another $40 billion to $50 billion from the government.
The plan to put them into conservatorship was meant to be temporary, but more than a year and a half later, Treasury Secretary Timothy Geithner has only just begun the process of figuring out how to overhaul the U.S. housing finance system.
The company warned of "significant uncertainty as to our long-term financial sustainability" as it expects the continued weak housing market to keep default rates and credit-related costs high.
The need for more government money was expected and is unlikely to play a significant role in the debate on Capitol Hill over the future of the two firms.
A trio of senior Republican senators want to require the government to relinquish its control of Fannie and Freddie within two years.
Senators Richard Shelby of Alabama, John McCain of Arizona and Judd Gregg of New Hampshire want to add their proposal to a broader debate on Wall Street regulation. The Senate is expected to consider their amendment on Tuesday, though it is not expected to garner enough votes for passage.
The first-quarter net loss included a $1.5 billion dividend on its senior preferred stock held by the Treasury Department. The Obama administration on December 24 pledged to backstop all losses for the two firms through 2012.
The quarterly loss was smaller than the total $16.3 billion loss reported in the fourth quarter.
Fannie Mae said federal aid is helping keep the company solvent, but the dividends payments it is incurring are substantial.
"Given our expectations regarding future losses and draws from Treasury, we do not expect to earn profits in excess of our annual dividend obligation to Treasury for the indefinite future," the company said.
Because of current trends in housing and financial markets, Fannie Mae expects to continue having a net worth deficit in future periods and to need to tap more funding from the Treasury.
"Promoting sustainable homeownership and maintaining ready access to liquidity are our guiding principles in serving the residential markets," said Michael Williams, the firm's chief executive.
The government has relied heavily on both companies, which buy mortgages from lenders to stimulate more lending, to stabilize the housing market.
(Editing by Padraic Cassidy)
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