According to Fannie Mae’s quarterly report for the second quarter of 2010, the government sponsored entity (GSE) had a net loss of $1.2 billion in the second quarter. This is an improvement from the $11.5 billion Fannie Mae lost in the first quarter of 2010. Fannie requested $1.5 billion in funds from the Treasury, bringing the total bill for bailing out Fannie Mae to $86.1 billion. Hey, what’s a few billion between friends?
According to the report, Fannie’s more recent mortgages (those from 2009 and 2010) are performing better than loans from previous years. This is a reflection of the stricter underwriting standards that Fannie adopted following the housing market crash. The report states that almost all of the losses from 2009 and 2010 are attributable to mortgages that were purchased between 2005 and 2008.
The mortgage giant says that home prices have increased 2.2 percent nationally in the second quarter of 2010, while they are down nearly 17 percent from the peak in the third quarter of 2006. The expectation is that prices will decline slightly for the remainder of 2010 and into 2011 before stabilizing. It doesn’t specify what constitutes a “slight” decline.
As to loan modification and foreclosure prevention initiatives, Fannie Mae President and CEO Mike Williams said, “We are focused on sustainable homeownership, and our higher underwriting and eligibility standards reflect that. Across our industry, we are seeing a more realistic approach to housing and lending that bodes well for the future. At Fannie Mae, we are committed to maintaining appropriate standards while also supporting affordable housing for low- and middle-income families. We will also continue to support a variety of programs to reach borrowers who need help, so whenever possible, they can avoid foreclosure and stay in their homes”.
Per the Fannie Mae 2010 Second Quarter Credit Supplement, we can see that REO acquisitions are through the roof. In 2008, there were 94,652 REO acquisitions. In 2009, 145,617, and so far through two quarters of 2010 there were nearly 130,000 REO acquistions. This is a whole lot of REO, and this is just Fannie Mae for half of the year. This likely presages increased losses in the future.
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