The Federal National Mortgage Association has requested $8.4 billion in additional federal aid, as housing market losses continue to rattle the economy.
Fannie Mae recorded a loss of $11.5 billion in the first quarter as the mortgage giant posted its 11th consecutive quarterly loss, bringing total losses to $145 billion since the second quarter of 2007, The Wall Street Journal reported.
Pretty soon that looks like real money, despite signs of a recovery. A year ago, Fannie Mae lost $23.5 billion. More pointedly, the number of Fannie Mae loans 90 days or more past due dropped from 5.59 percent in February to 5.47 percent in March — a small improvement, but the first in that category in three years, the Journal said.
It might be said that Fannie Mae and its counterpart, Freddie Mac — the Federal Home Loan Mortgage Corp. — took the brunt of the housing debacle, given their dual-mission is to support housing as well as profit from it. And, for all that, the government-sponsored enterprises are still doing half their job. In the first quarter Fannie, Freddie and the Federal Housing Administration insured or guaranteed 96.5 percent of all new mortgages, Insider Mortgage Finance reported.
What to do with all that mess — reserves dropping, foreclosures continuing and Freddie and Fannie with their hands out?
An amendment to the financial reform bill submitted by Sen. John McCain, R-Ariz., would unwind Freddie and Fannie over a five-year period, pulling them out of federal conservatorship and plunking them into receivership, a bankruptcy process.
The banking industry has made some gains, but it is questionable how eager big banks would be in taking over an additional $5.5 trillion exposure in mortgages backed by a wobbly market. The FHA, the not-quite-ready-for-prime-time agency, would have a difficult time taking over the role of trend-setter in the mortgage markets, which look to Freddie and Fannie for lending parameters.
Analysts have said the bill won’t survive, but it will serve as an effective warning shot over the bow that Fannie and Freddie are still in need of a big fix.
“We need to reform them. But if we were to just pull them out … that would be really dangerous. Swaths of the country would get hammered because there’s no credit for housing,” said Christopher Mayer at the Columbia Business School.
International markets Tuesday looked to be swinging back from a one-day jump provided by the announcement of nearly $1 trillion in loans to be made available to debt-burdened countries in Europe.
In Japan, the Nikkei 225 index fell 1.14 percent, while the Shanghai composite index in China dropped 1.9 percent. The Hang Seng index in Hong Kong fell 1.37 percent, while the Sensex in India lost 1.09 percent.
In Australia, the S&P/ASX 200 lost 1.13 percent.
In midday trading in Europe, stocks showed signs the “shock and awe” of the $1 trillion lending program had run out of shock and awe. In Britain, the FTSE 100 index fell 1.81 percent after posting a 5.16 percent gain Monday. The CAC 40 in France, up 9 percent Monday, dropped 2.31 percent. In Germany, the DAX 30 fell 1.2 percent, while the pan-European DJ Stoxx 50 lost 2.19 percent.
Similar Posts:
- Fannie Mae requests $8.4B in aid
- U.S. markets wobble to close
- Homeowners pick fixed-rate, shorter terms
- U.S. markets slide early
- Mortgage rates at 6-week low
Recent Comments