NEW YORK Fannie Mae FNM.N, the largest provider of financing for U.S. home loans, on Wednesday reported a $3.6 billion quarterly loss as the housing slump deepened, sending its shares to a 12-year low.
The government-chartered company posted a $3.80 per share net loss for the fourth quarter. That compares with a profit of $604 million in the year-earlier period and a $1.52 billion loss in the third quarter.
Analysts expected the company would post a fourth-quarter loss of $1.39 per share, according to Reuters Estimates.
A sharper-than-expected drop in home prices that first sparked a crisis in subprime lending has since tainted the entire U.S. housing market, hurting Fannie Mae and rival Freddie Mac FRE.N.
Rising delinquencies and foreclosures have led the companies to write down values of mortgage securities they own and increase reserves to cover their guarantees of payment on bonds held by investors.
Credit-related expenses soared to $3 billion last quarter from $326 million in the same period for 2006. Revenue rose 8.6 percent to $3.1 billion, driven by a 26.4 percent increase in guaranty fee income.
The report drove Fannie Mae shares to a 12-year low in pre-market trading near $25.70. The dismal results also pushed U.S. stock index futures lower and lifted U.S. Treasury debt prices.
Improvements in the guaranty business have "been far outweighed by the negative financial impacts of rising mortgage defaults, falling home prices, and extraordinary disruptions in the credit markets," Chief Executive Officer Daniel Mudd said in a statement.
Fannie Mae, which was created during the Great Depression to boost homeownership, is now struggling to strike a balance between enlarging its business while tightening underwriting guidelines to protect itself from further losses.
Regulators and lawmakers have also leaned harder on Fannie Mae and Freddie Mac in recent months to bolster the housing market, most recently by increasing the size of loans eligible for their businesses. However, losses at the companies have squeezed their profits and reduced capital that is needed to expand.
Fannie Mae shares have fallen 33 percent this year through the market close on Tuesday, compared with a 3.8 percent drop in the KBW Mortgage Finance index .MFX over the same period.
(Reporting by Al Yoon; Editing by Tom Hals)