WASHINGTON – Secondary mortgage market giant Fannie Mae, operating under federal conservatorship since September, reported a $29 billion loss for the third quarter, bringing year-to-date losses to a staggering $34.5 billion.
The third quarter loss includes a $21.4 billion charge to establish a deferred tax asset valuation allowance because of the rapid deterioration of the market.
The year-to-date losses have reduced the net worth of Fannie Mae to just $9.4 billion at Sept. 30, from $44.1 billion at year-end 2007. And half of the remaining net worth consists of retained deferred tax assets, which are also subject to reduction or elimination. This makes it likely Fannie Mae will tap the $100 billion line of credit it has with the Treasury under the conservatorship some time next year, the company said.
Credit expenses soared to $9.2 billion in the third quarter due to deteriorating mortgage credit conditions and continuing declines in home prices, the company said.
Fannie Mae's loss equaled $13 per share, compared with a loss of $1.4 billion, or $1.56 per share a year earlier. The company said it expects a significant loss for the fourth quarter if downward trends in U.S. housing and financial markets continue.
Sister secondary mortgage giant Freddie Mac is also expected to report huge losses when it releases its financial statements later this week.
