Fannie Loses $23 BILLION As "Low-Risk" Loans Go Bad


The gigantic moneyhole known as Fannie (FNM) continues its attempt to suck up every dollar in the known universe. The agency said today that it lost a staggering $23 billion in the first quarter, and that it was looking to the Treasury Department for another $19 billion in aid. And, says the company, it has no freakin’ clue when it will be profitable again. It’ll be a long time.

Why the ugliness? Well, yeah, Fannie’s job was to hoover up a lot of trash. But even good loans to happy prime borrowers — like the family pictured — are starting to go sour.

 Our entire guaranty book of business, including loans with lower risk characteristics, has begun to experience increases in delinquency and default rates as a result of the sharp rise in unemployment, the continued decline in home prices, the prolonged downturn in the economy, and the resulting increase in mark-to-market LTV ratios. In addition, certain loan types have continued to contribute disproportionately to the increases in serious delinquencies and credit losses we reported for the first quarter of 2009. These include loans on properties in California, Florida, Arizona and Nevada; loans originated in 2006 and 2007; and loans in higher-risk categories such as Alt-A loans and interest-only loans.
“Alt-A loans” generally refers to mortgage loans that can be underwritten with reduced or alternative documentation than that required for a full documentation mortgage loan but may also include other alternative product features. In reporting our credit exposure, we classify mortgage loans as Alt-A if the lenders that deliver the mortgage loans to us have classified the loans as Alt-A based on documentation or other product features. We have classified loans as nonperforming, and placed them on nonaccrual status, when we believe collectability of interest or principal on the loan is not reasonably assured.

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