Fannie Mae lost $2.19 billion in the first-quarter, about four times that of average analyst expectations. And the largest U.S. mortgage company will now raise $6 billion in order to continue to fund operations.
The “severe weakness” in the housing market was worse than expected in the quarter and will continue this year, Chief Executive Officer Daniel Mudd said in a statement….Fannie Mae said home price declines this year are exceeding its estimates and attributed the larger share of its credit losses to certain types of loans in California, Florida, Michigan and Ohio. The government-chartered company, which sold $7 billion of preferred stock in December, may need as much as $15 billion to cope with the delinquencies and foreclosures, analysts said.
And while Fannie Mae’s portfolio (and collateral) continues to deteriorate, the OFHEO has said “it will lower requirements for surplus capital to 15 percent from 20 percent once the money is raised, enabling Fannie Mae to buy more mortgages. The limit may be reduced to 10 percent by September if Fannie Mae continues to retain excess capital….”
∙ Fannie Mae to Raise $6 Billion in Capital After Loss [Bloomberg]