Fannie Mae (FNM) joins the mortgage-gambling-loss parade in another spectacular demonstration of management incompetence. The largest mortgage lending company in the U.S. reported a $2.19 billion ($2.57 per share) loss for Q1, wildly missing Street expectations ($0.64 per share). The firm also said that it will cut its dividend and raise $6 billion in capital. Bloomberg:
Fannie Mae and smaller rival Freddie Mac may each need as much as $15 billion in capital to cope with the delinquencies and foreclosures that pushed their shares down more than 50 per cent in the past year. Fannie Mae was able to narrow its loss from the combined $5 billion recorded for the third and fourth quarters partly by raising fees, and seeking out safer mortgage purchases.
“Fannie has taken steps to mitigate some of the mark-to- market charges that whipsawed results in recent quarters,” Morgan Stanley analyst Kenneth Posner wrote in a report. “The worst of these marks should be behind us.”
Shares fell as much as $3.27, roughly 12%, in early morning trading.
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