The Federal National Mortgage Association or Fannie Mae, the largest mortgage provider in the country, has been badly beaten by the unabated spread of foreclosure properties across the U.S.
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.
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