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Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Currencies

Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

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Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

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Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Banks

Carney: UK is ‘investment banker for Europe’

The governor of the Bank of England has repeated his calls for a “smooth and orderly” UK exit from the EU, saying that a transition out of the bloc will happen, it was just a case of “when and how”. Responding to the BoE’s latest bank stress tests, where lenders overall emerged with more resilient […]

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Categorized | Financial, Property

Fannie Mae to ask Treasury for $4.6bn more


Posted on February 29, 2012

Fannie Mae, the US government-controlled mortgage financier, will ask taxpayers for another $4.6bn after recording a $2.4bn loss last quarter, the company has said.

The latest appeal brings its total request from the US Treasury to $116bn, of which $20bn is due back to taxpayers in the form of a dividend as part of its government rescue.

The company, which together with its corporate cousin Freddie Mac backs nearly half of all outstanding US home loans, lost $16.9bn last year, a 20 per cent rise from 2010.

Fannie Mae blamed the deterioration last quarter on credit losses sustained on loans originated before 2009 and on its interest rate derivatives. The company was betting that interest rates would not fall.

The mortgage financier’s losses will probably put more pressure on the company and on its regulator, the Federal Housing Finance Agency. Fannie Mae, Freddie Mac and the FHFA are in the middle of a broader debate centred on just how much support the US government should provide to America’s property market.

Democrats, including the Obama administration, want the FHFA to allow for Fannie and Freddie to reduce borrowers’ mortgage principal, a type of mortgage restructuring both have thus far refused to do. Republicans fear that principal reduction modifications will deepen Fannie Mae’s losses, hurting its main owner, US taxpayers.

About one in five US homeowners with a mortgage owe more on their housing debt than their properties are worth.

In depth

Freddie and Fannie

headquarters of mortgage lender Freddie Mac

The role of the state-backed US mortgage originators has come under the microscope

By reducing principal, some policymakers and legislators reckon that delinquency rates will tumble and home seizures will decrease, leading to an eventual rise in home prices.

Fannie Mae blamed its losses in part on deteriorating property prices. Loans in negative equity had a serious delinquency rate of 14 per cent, the company disclosed in its annual report filed with securities regulators, versus an overall serious delinquency rate of about 3.9 per cent.

The mortgage company owns or guarantees nearly $2.8tn of home loans, making it the largest provider of mortgage credit in the US. Fannie Mae does not originate loans; rather, it purchases and guarantees them for inclusion in securities for sale to investors.

Fannie Mae and Freddie Mac were taken over by the US government in 2008. The Obama administration has said it wants to wind down the companies, yet it has not put forward a plan to do so.

Executives at Fannie Mae have complained that key employees are hard to keep because of the companies’ uncertain future, hobbling their ability to turn consistent profits. Freddie Mac reports earnings later this week.

Separately, Fannie Mae disclosed that it decided to amend its contract with its largest partner, Bank of America, and will no longer buy traditional home purchase loans from the lender in an escalation of a dispute over compensation for soured mortgages. BofA had previously indicated that it was the party that moved to alter the contract.