Fannie Mae Posts Loss, Asks Treasury for $1.5B

WASHINGTON, DC-Fannie Mae’s quarterly earnings reports can all but write themselves: another quarter, another loss, another trip to the Treasury Department for additional funds. The only difference is in the numbers--and this time, that difference is good news. Fannie posted a second-quarter net loss of $1.2 billion, which is down from its net loss of $14.8 billion in the same period a year earlier. In fact, it is the smallest loss the GSE has had in three years. 

It will be tapping the Treasury for $1.5 billion. That amount brings the government's investment in Fannie Mae to $86.1 billion. For multifamily firms, the earnings, however, delivered mixed news. "The serious delinquency rate for Fannie Mae’s multifamily loans is 0.8% as of June 30, up from 0.5% a year earlier but much lower than for the market as a whole," Sam Chandan, global chief economist and EVP of Real Capital Analytics, tells GlobeSt.com. 

Still, the GSEs clearly have a tough slog ahead. They were delisted from the New York Stock Exchange in June because their stock had not maintained price levels above $1 per share--a requirement of the NYSE. They are also facing the likelihood of a complete revamp, as the Obama Administration has promised to convene a summit on that subject this month. Rep. Barney Frank (D-MA) has said he will begin work on legislation this fall. 

In short, while the current quarter’s loss improves upon recent history, conditions in the housing market remain precarious, Chandan says. "We can reasonably expect that the GSEs still face a long road in weaning themselves from Treasury’s support,” he notes. “For the time being, these challenges remain a distraction from a thoughtful policy evaluation of the GSEs’ relatively stable but smaller multifamily businesses."

Under the provisions of Dodd-Frank, the Treasury Secretary will be required to present recommendations to Congress by January 31, 2011 for the unwinding of the conservatorship, Chandan notes. "At least for now, this timetable implies little change in the status quo for multifamily market participants."