- The Washington Times - Saturday, May 9, 2009

Fannie Mae, operating under a federal conservatorship, asked the U.S. Treasury for a $19 billion capital investment and raised the possibility that its long-term survival may be dependent on continued government funding.

Fannie Mae, which took $15.2 billion in aid March 31, cited the “unprecedented” housing market slump and government-mandated programs that are creating “conflicts in strategic and day-to-day decision-making,” according to documents the company filed Friday with the Securities and Exchange Commission.

The first-quarter net loss widened to $23.2 billion, or $4.09 a share, pushing Fannie Mae’s net worth below zero for the second time. The credit quality of loans and mortgage bonds that Fannie Mae owns or guarantees deteriorated amid the yearlong economic recession and as the government forced the company to help struggling homeowners refinance or modify their loans.

“Future activities that our regulators, other U.S. government agencies or Congress may request or require us to take to support the mortgage market and help borrowers may contribute to further deterioration in our results of operations and financial condition,” Fannie Mae said in the filing.

The government initiatives have yet to curb the surge in foreclosures and delinquencies. A record 803,489 U.S. properties received a default or auction notice or were seized in the first quarter, 24 percent more than a year earlier, as employers cut jobs and as temporary programs to assist homeowners came to an end, RealtyTrac Inc. said April 16.

Fannie Mae and smaller competitor Freddie Mac, which own or guarantee almost half of the U.S. residential mortgage debt, were seized by regulators in September because of their losses. In February, the government doubled its capital commitment for each company from $100 billion, which the Treasury makes through preferred stock purchases when the value of the companies’ assets drop below the amount owed on their obligations.

Fannie Mae’s decision to tap an additional $19 billion in aid will raise its annual dividend payments to the Treasury to $3.5 billion from $1.6 billion. The company said its commitment to pay those dividends, the likelihood of seeking more aid and the deteriorating housing market creates “significant uncertainty as to our long-term financial sustainability.”

“We expect to have a net worth deficit in future periods, and therefore will be required to obtain additional funding from the Treasury,” Washington-based Fannie Mae said.

McLean-based Freddie Mac tapped $13.8 billion in aid in November and $30.8 billion in March.

Fannie Mae said its net worth, or the difference between assets and liabilities, fell to negative $18.9 billion as of March 31, from negative $15.2 billion on Dec. 31.



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