Fannie Mae Seeks Gov. Assistance, HECM Share Falls to 2%

Despite $73 million in Q4 net income, Fannie Mae reported a fourth-quarter loss of $2.1 billion on Thursday and an annual loss of $14 billion.

The annual loss attributable to common stockholders in the fourth quarter of 2010 was $2.1 billion and to eliminate the company’s net worth deficit of $2.5 billion for 2010, the Federal Housing Finance Agency has requested $2.6 billion from the Treasury, 80% of which is the dividend payment to the Treasury.

The outstanding unpaid principal balance of reverse mortgage whole loans included in Fannie Mae’s mortgage portfolio was $50.8 billion as of December 31, 2010 and $50.2 billion as of December 31, 2009, the company reported. The majority of those loans are HECM loans insured by the FHA.

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In terms of HECM loans, Fannie Mae’s market share of new reverse mortgages was 2% in 2010, down from 50% in 2009. The decrease comes following the company’s announcement in December that it would exit the reverse mortgage business and would discontinue the acquisition of newly originated HECM loans.

“Because home equity conversion mortgages are insured by the federal government, we believe that we have limited exposure to losses on these loans…The decrease in market share was a result of changes in pricing strategy and market conditions,” the company said.

Written by Elizabeth Ecker

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  • I got a chuckle out of this sentence: “Despite $73 million in Q4 net income, Fannie Mae reported a fourth-quarter loss of $2.1 billion on Thursday and an annual loss of $14 billion.”

    The problem with Fannie Mae is the manner it must report earnings. Per its 10K, it did make $73 million in net profit. However, net income available to other shareholders was a negative $2.1 billion due to the distribution it must make on its preferred shares to Uncle Sam.

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