More pain at Fannie
August 8, 2008: 7:53 AM EDT
NEW YORK (CNNMoney.com) -- Mortgage finance giant Fannie Mae reported a much larger-than-expected loss in the second quarter and slashed its dividend, more signs that the problems in housing and financial markets are not over.
The firm reported a net loss of $2.3 billion, or $2.54 a share. Analysts surveyed by Thomson Reuters forecast a loss of 68 cents a share, compared to earnings of $1.86 a share a year earlier. But large increase in reserves for bad debt and a writedown in the value of its holdings hurt the results.
The company also slashed its quarterly dividend to 5 cents a share, down 86% from its previous level, as the company tries to maintain the capital reserves it needs to operate.
Shares were down nearly 8% in pre-market trading immediately after the report.
Fannie (FNM, Fortune 500) and sibling company Freddie Mac (FRE, Fortune 500) are shareholder-owned companies set up by the government to provide funding to banks and other lenders making home loans.
They buy loans, attach a guarantee, then sell securities backed by the loans' income stream. They have been badly hurt in the last year by the sharp decline in home prices and the rise in mortgage delinquencies and foreclosures.
Between them they back or own more than $5 trillion in single family home loans, or roughly half the outstanding U.S. mortgages. The troubles in the housing and credit markets led to shares of both firms plunging in the last two months.
That, in turn, prompted Congress to authorize a rescue plan that would have the Treasury Department loan the firms unlimited amount of money or buy their equity if necessary.
On Wednesday, Freddie reported a much larger-than-expected loss due to the bad loans and slashed its dividend at least 80% in an effort to retain capital it needs to operate.
Shares of both companies tumbled further on that report in Wednesday trading and again Thursday, leaving Fannie shares off 61% between June 16 and Thursday's close. Freddie shares are off 75% in the same period.
August 8, 2008: 7:53 AM EDT
NEW YORK (CNNMoney.com) -- Mortgage finance giant Fannie Mae reported a much larger-than-expected loss in the second quarter and slashed its dividend, more signs that the problems in housing and financial markets are not over.
The firm reported a net loss of $2.3 billion, or $2.54 a share. Analysts surveyed by Thomson Reuters forecast a loss of 68 cents a share, compared to earnings of $1.86 a share a year earlier. But large increase in reserves for bad debt and a writedown in the value of its holdings hurt the results.
The company also slashed its quarterly dividend to 5 cents a share, down 86% from its previous level, as the company tries to maintain the capital reserves it needs to operate.
Shares were down nearly 8% in pre-market trading immediately after the report.
Fannie (FNM, Fortune 500) and sibling company Freddie Mac (FRE, Fortune 500) are shareholder-owned companies set up by the government to provide funding to banks and other lenders making home loans.
They buy loans, attach a guarantee, then sell securities backed by the loans' income stream. They have been badly hurt in the last year by the sharp decline in home prices and the rise in mortgage delinquencies and foreclosures.
Between them they back or own more than $5 trillion in single family home loans, or roughly half the outstanding U.S. mortgages. The troubles in the housing and credit markets led to shares of both firms plunging in the last two months.
That, in turn, prompted Congress to authorize a rescue plan that would have the Treasury Department loan the firms unlimited amount of money or buy their equity if necessary.
On Wednesday, Freddie reported a much larger-than-expected loss due to the bad loans and slashed its dividend at least 80% in an effort to retain capital it needs to operate.
Shares of both companies tumbled further on that report in Wednesday trading and again Thursday, leaving Fannie shares off 61% between June 16 and Thursday's close. Freddie shares are off 75% in the same period.
