Fannie Mae posted a net loss of about $19.8 million during the third quarter or about $3.47 per share from $29.4 million losses or $13 per share for the same period a year ago. Already, it has filed a request with the U.S. Securities and Exchange Commission for additional funding to allow it to reduce its net worth deficit. The agency hopes to receive the additional funding the 31st of December.

According to Fannie Mae, its third quarter loss was a result of credit-related expenses amounting to almost $22 billion. Also, the agency said that majority of its funds were used for the implementation of the Making Home Affordable Program of the Obama Administration.

Under the Obama program, banks and lenders are encouraged to modify or refinance loans to reduce the number of foreclosure properties across the U.S. However, the program requires that Fannie May and Federal Home Loan Mortgage Corp. or Freddie Mac, another government-sponsored enterprise, should get the mortgage loans from securities which led to losses.

During the implementation of the program, delinquencies for loans 3 months or more past due or facing foreclosure have increased. And the unabated increase in the unemployment rate has prevented many struggling homeowners from finding alternatives to save their homes from foreclosures.

Because of its net quarter losses, Fannie Mae has filed for a request for more federal funding to allow it to reduce its net worth deficit. So far, the agency has received about $44.9 million as federal government assistance. The money was under a purchase agreement for senior preferred stocks.

Additionally, Fannie Mae plans to sell about $2.6 billion worth of unused tax credits. Fannie Mae’s net revenue of Fannie Mae from July to September rose by $5.9 billion from about $5.6 billion during the second quarter.

The Federal Housing Finance Agency took control of Fannie Mae in September 2007 which affected shares of the mortgage insurer. Its shares dropped by almost 7.1 percent. Fannie Mae explains that it expects net worth deficits in the coming months and so it needs to get additional funding.

And with the number of serious delinquencies rising to unprecedented heights, foreclosure properties across the U.S. will continue to pull down the economy and housing market.

Most of these defaults are expected to go into foreclosure because of recent data showing that the percentage of delinquent homeowners able to restore their home loan accounts to current status is dropping sharply.

The redefault rates for modified home loans have also increased significantly over the past months, with around 50 percent of borrowers with modified mortgages redefaulting within six months after signing into the Home Affordable Modification Program.
While helping the federal government carry out its HAMP initiative, Fannie Mae also provides guarantees to qualified home loans provided by private mortgage lenders, packages home loans into securities to be sold to investors and invests in mortgage-backed securities.

Whenever mortgages owned by Fannie are foreclosed, Fannie Mae sells them so it can use the proceeds for its operations and help communities minimize the adverse effects of foreclosures.

You can take a look at Fannie Mae foreclosures by visiting ForeclosureDeals.com, which is an exclusive online database for Fannie Mae homes. There are single-family houses, condo units and townhomes located in various neighborhoods.

When buying Fannie Mae homes, you should always hire a professional home inspector to examine the house you are buying. Fannie
Mae sells every foreclosure property as is and does not repair defects after the settlement. It also does not issue guarantees on its homes. It only discloses hazards on homes if there were previous hazard disclosures submitted to Fannie Mae.

Remember also that Fannie Mae requires you to be prequalified for a home loan before your real estate agent can submit a purchase offer. This requirement assures Fannie Mae that the person it is negotiating with is able to pursue and complete the home purchase.

For those looking for Fannie Mae financing, there are two programs available: the HomePath Renovation Mortgage Financing and the HomePath Mortgage Financing. Both of these programs require low down payments.

To buy a Fannie Mae foreclosure, you should negotiate with listing agents certified by Fannie Mae. You cannot directly buy from Fannie Mae. This is to ensure that the home purchase process is done professionally and all financial documents are accomplished efficiently according to regulations for Fannie Mae foreclosures and state laws on residential real estate sales.

The mortgage firm also announced that it has asked the federal government to provide $19 billion to help fund its continued operations. In the first months of 2009, Fannie Mae also asked the U.S. Treasury to provide $15.2 billion to help cover its losses in 2008.

It also reported that the Treasury has been authorized by President Obama to provide Fannie Mae with $200 billion.

Fannie Mae attributed its losses to the large numbers of forclosure homes that it had guaranteed. The inventories of foreclosed homes were also made worse by increasing number of defaults and delinquencies. In 2009, the number of forclosure homes has been rising largely due to rising unemployment rates. The falling prices of foreclosed properties worsened the housing market and led to further rises in inventories of forclosure homes.

Fannie Mae’s first quarter loss was lower than its loss in the last quarter of 2008, which totaled $25.2 billion and which occurred after the government took over the firm.

The first quarter loss was more than ten times the net loss in last year’s first quarter. Fannie Mae reported that it lost $4.09 per share in the first quarter.

Fannie Mae said that because of the large numbers of forclosure homes, it expected to need more financial help from the Treasury. It announced that the weak conditions in the financial and housing markets have made it unable to recover some of its losses.

On Friday, Fannie Mae was not able to be influenced by the stock rally. Its stock price of less than $1 fell more steeply by about 7 percent in the early morning trading.

The company also reported that despite its efforts in implementing foreclosure moratoriums, large numbers of foreclosed homes still arose. In the first quarter this year, it purchased 25,374 forclosure homes, which is an increase from the 20,998 it acquired in last year’s fourth quarter.

David Ursani, a Wall Street analyst, said that the federal government has been using Fannie Mae as one of its tools in controlling loses in the mortgage sector. He said that Fannie Mae has incurred much loss due to the wave of forclosure homes that it guaranteed.

Officials have found him dead in his Fairfax residence on this Wednesday morning and suspect it to be a suicide case with no foul play. However, investigations are still on in this case before reaching any final conclusions.

According to official sources, David Kellermann was employed with Freddie Mac and associated with this company for almost 16 years. He served the company diligently while holding important positions within the company as Vice President of the company.

Kellermann managed all the financial responsibilities of the company including financial planning, annual budgeting while looking after all the financial regulations and managing issues related to tax compliance.

It is believed that Kellermann used to report to the former CEO David Moffett and held several prestigious positions in the company as Senior Vice President, Corporate Controller and also as accounting officer. Kellermann, 41, was named the CFO of the company in last September when the federal government removed some of the high-level employees of the company after taking over the company.

Apparently, Freddie Mac had suffered huge financial losses reported to be in billions along with sister concern, Fannie Mae recently, after making huge investments in various mortgage related areas. Both these firms have received a bailout package amounting to $60 billion so far from the government.

Fannie Mae and Freddie Mac are continuing their rental program for their repo homes despite lifting their moratoriums. According to Freddie Mac spokesperson Brad German, many homeowners can still stay in their repo homes for a time and pay their rent from month to month until the real estate foreclosed homes are sold.

In response to some housing advocates who expressed dismay when the foreclosure moratoriums ended, German said both renters and former owners can apply to the repo homes rental program. Danilo Pelletiere, research chief at the National Low Income Housing Coalition, supported German by saying that perpetual moratoriums are not effective solutions to the foreclosure problem.

However, banks are not receptive to the concept of renting out their repo homes. They reiterated they are not in the real estate management business. The lenders also argue that they should not be blamed for the neighborhood blight and nuisance caused by vacant homes. Robert Klein, chief executive of Safeguard Properties, even claimed that the mortgage service industry has been spending more than $2 billion yearly for the maintenance of vacant repo homes.

Judith Liben, a principal lawyer of the nonprofit advocacy group Massachusetts Reform Institute, said banks should consider the economic benefits of putting renters on vacant repo homes. She said vacant foreclosed homes typically lose about half of their market values before they are sold as REOs.

David Berenbaum, top executive of the National Community Reinvestment Coalition, has also criticized the way banks have been using broker price opinions (BPOs) to sell their foreclosure properties more quickly. BPOs are cheaper alternatives to full professional appraisals and are usually done by real estate brokers with minimal appraisal training. Berenbaum said the banks’ use of BPOs to sell repo homes to speculators and investors at bargain prices have been driving down home prices and overall property values.

Dean Baker of the Center for Economic and Policy Research, said encouraging mortgage lenders to consider the rental option to solve the problem of repo homes remains difficult because the lending industry is not interested in the rental business and many community advocates have not been promoting the rental option for repo homes.

Brian Faith of the Federal National Mortgage Association or Fannie Mae said that thousands of e-mails and calls were received by the government-affiliated agency from troubled owners of distressed properties who want to know if they are eligible for Obama’s anti-foreclosure homes plan.

He explained that over 20,000 distressed homeowners sent e-mails and 10,000 more have called asking whether they have a mortgage loan owned and guaranteed by the agency. He added that the volume of calls was eight times the normal call volume that the agency handles.

Meanwhile, the Federal Home Loan Mortgage Corp. or Freddie Mac was also inundated with e-mails and telephone calls from distressed homeowners.

Brad German of Freddie Mac said that the agency received 1,600 calls and posted 42,000 Web visit for a single day. He claimed that homeowners wanted to call their mortgage servicers to find out about new options that will help them save their properties from foreclosures.

Under Obama’s anti-foreclosure homes plan, Fannie Mae and Freddie Mac will allow borrowers whose loans they own or guaranteed to refinance even if they have little or no equity. Both government-sponsored enterprises will also contribute over $20 billion for subsidizing interest rates to reduce monthly payments for homeowners on the brink or already in default.

Other private entities got their own share of action after Obama unveiled details of his anti-foreclosure homes plan.

Calls received by Countrywide’s central consumer line increased by almost 75 percent. JPMorgan Chase also experienced a heavy volume of calls on its mortgage hotline.

Meanwhile, the servicing department of Wells Fargo Home Mortgage received over 3,500 calls from homeowners who requested information about the anti-foreclosure homes plan of Obama. The volume of calls increased five times two days after Obama unveiled his foreclosure homes prevention plan.

Michael Moskowitz of Equity Now noted that calls received by the lending company were not mostly from troubled owners of foreclosure properties. He said that the anti-foreclosure homes program has been attracting homeowners who are current on their mortgages and can afford to meet their monthly payments.

On the other hand, the Housing and Urban Development registered 252,858 online visits while searches for housing counselors on its Web site increased by 14 percent.

Loan refinancing with Fannie Mae or Freddie Mac has the following requirements: The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae; borrowers must not be in default; monthly payments have been on time for the previous 12-month period; and the new loan can not be five percent more than the home’s current value. Under this loan refinancing scheme, borrowers can reduce their annual loan payments by over $2,300 by refinancing to a rate hovering around 5.16 percent.

The loan modification scheme aims to modify mortgage loans so that homeowners afford monthly payments and avoid foreclosures. It provides cash incentives to mortgage lenders and services and also rewards homeowners who keep up with the reduced monthly payments and stay away from foreclosures.

The requirements for this scheme are the following: The borrowers must be staying in the homes described in the mortgage they are paying for; the mortgages must have been taken before January 1, 2009; and the loan amounts must not be higher than the limits established by Freddie Mac and Fannie Mae.

Cash incentives are given to mortgage holders, servicers and borrowers if they cooperate to sustain modified mortgage loans to avoid foreclosures. For every successful loan modification, the mortgage servicer receives $500 and the mortgage holder receives $1,500. The mortgage servicer will also receive $1,000 for every year that the borrower keeps up with the modified payments for up to three years. Borrowers are also rewarded for their efforts to avoid foreclosures. They receive $1,000 for every year that they keep up with payments for up to five years.

To accomplish the loan modification, mortgage lenders need to agree to lower mortgage rates, reducing borrowers’ monthly payments to not over 38 percent of their monthly income. Lenders will then agree to reduce further the rates so that borrowers’ monthly payments become only 31 percent of their monthly income. For this second rate reduction, mortgage lenders will be subsidized by the federal government. The program will match whatever lenders give off to reach the 31 percent payment-income ratio and help avert further foreclosures.

Moffett was appointed CEO of Freddie Mac when the federal government took control of the mortgage firm to save it from collapse in September. The flood of foreclosures overwhelmed the mortgage company, necessitating its rescue by the government to prevent the collapse of the mortgage market and protect millions of homeowners threatened by foreclosures. Freddie Mac, together with Fannie Mae, was put under conservatorship by the Federal Housing Finance Agency. Fannie Mae’s chief executive Daniel Mudd was also replaced by Herb Allison, the previous CEO of TIAA-CREF.

Freddie Mac chairman John Koskinen told reporters Moffett made significant contributions during Freddie’s crucial transition period. Moffett also worked with the FHFA to help control the onslaught of foreclosures and bring back stability to the mortgage and housing sectors.

Last year, Freddie Mac posted losses totaling $25 billion in the third quarter equivalent to $19.44 per share while Fannie Mae posted about the same loss, $25.2 billion, equivalent to $10.27 per share. Freddie Mac has already received almost $14 billion in federal assistance since its takeover and may still require billions of capital infusion for its continued operation. As foreclosures continue to rise in many areas despite mitigation efforts, Freddie Mac may still need about $35 billion to continue to carry out its mandate as part of Obama’s $75 program to avert foreclosures.

Under President Obama’s Homeowner Stability Initiative, Freddie Mac and Fannie Mae will offer refinancing with low mortgage rates to homeowners who have little or zero equity in their homes. They will help maintain affordable mortgage rates and help stabilize the mortgage market. These two mortgage firms will also continue to be supported with funding by the Treasury Department. The Treasury will increase its preferred stock purchase agreements with the mortgage firms from $100 billion each to $200 billion each. It will also continue to buy Fannie Mae and Freddie Mac’s mortgage-backed securities to help promote liquidity in the housing market battered by foreclosures.

They were each given a $100-billion lifeline from the government and they accounted for more than 75 percent of mortgage originations towards the end of last year. Their activities injected the much needed cash-flow required by the financing and lending sectors, which made their importance clear for both homebuyers and lenders.

As indicated by the Federal Housing Finance Agency, the federal entity regulating these two companies, the Obama administration has made it clear that Fannie Mae and Freddie Mac will continue on their key role of stabilizing the housing market. Each will play a vital part in the tax foreclosure properties prevention program planned by the new administration. These plans include:

• Fannie Mae and Freddie Mac to create provisions for low-cost refinancing access to borrowers having little or no remaining equities on their homes. This move is expected to help at least 5 million borrowers from losing their homes to foreclosures.
• As part of the $75 billion loan modification program, Fannie Mae and Freddie Mac will contribute over $20 billion to help subsidize interest rate reductions for struggling borrowers with tax foreclosure properties.

For these two struggling companies to accomplish their tasks, the administration will pour in at least $200 billion each in support, which is double than previous levels. On top of that, the administration has agreed that the two companies can guarantee or own mortgages up to $900 billion, which is higher than the previous $850 billion.

This added support and funding from the government comes at a very crucial time for the two companies, which are reeling from the impact of soaring defaults and tax foreclosure properties as the economy continues to plummet. Both firms are expected to report huge fourth quarter losses. With these trends, both entities may need more than $200 billion each from the government, but the administration has made it clear that the federal government will be there to back them up.

Obama’s plan focuses on loan refinancings and loan modifications that would reduce monthly mortgage payments affordable and sustainable for troubled homeowners. The success of these processes would depend on agencies and corporations that will work out these loan restructurings with the borrowers.

The top agency involved is the Treasury Department. This is the agency that will provide the $75 billion approved by Congress to fund Obama’s foreclosure rescue plan. Aside from that, it will also fund Fannie Mae and Freddie Mac so that these two corporations can continue to maintain the strength and stability of the mortgage sector. It will continue to buy Fannie Mae and Freddie Mac’s mortgage-backed securities, increase stock purchase deals and increase the two firms’ mortgage portfolios to $900 billion.

Two of the most involved government organizations are government-controlled mortgage giants Fannie Mae and Freddie Mac. The first key requirement for homeowners to be eligible for loan restructuring is that their mortgage loan should have been issued, guaranteed or serviced by Fannie Mae or Freddie Mac. Fannie Mae and Freddie Mac are at the center of the foreclosure rescue scheme. They have been ordered to develop standards or benchmarks for loan modifications for mortgage lenders to follow. They will also need to ensure that mortgages are available and affordable for all responsible homebuyers.

The other agencies involved are the Federal Deposit Insurance Corp. (FDIC), Department of Housing and Urban Development (HUD), Federal Reserve and Federal Housing Administration (FHA). These agencies will each contribute to the supervision of the implementation of foreclosure initiatives.

The housing finance agencies of all states will also be involved in the foreclosure plan. These state agencies will help homebuyers work out their mortgage loans with Fannie Mae or Freddie Mac and their mortgage banks.

Finally, the closest parties to the borrowers within the foreclosure program are the mortgage lenders. These lenders will decide whether to offer loan modifications to certain types of borrowers and to what extent will they reduce the loans so that they become affordable. Recognizing this, the foreclosure plan created a scheme so that the government will subsidize part of the reductions that the lender offers to troubled homeowners. Servicers will also receive a cash incentive of $1,000 for every eligible modification and another incentive of up to $1,000 per year for up to three years if the borrower keeps current the mortgage account.