Fresh off Freddie Mac asking the US Treasury for $10.6bn to offset losses on bad loans, Fannie Mae entered its own plea for a $8.4bn helping of financial aid.
Moreover, the home-loan company — which on Monday reported a net loss of $13.1bn for the first quarter of 2010 — warned in its 10-Q filing with the SEC that there is “significant uncertainty as to our long-term financial sustainability”:
We expect that the actions we take to stabilize the housing market and minimize our credit losses will continue to have, in the short term at least, a material adverse effect on our results of operations and financial condition, including our net worth. There is significant uncertainty in the current market environment, and any changes in the trends in macroeconomic factors that we currently anticipate, such as home prices and unemployment, may cause our future credit-related expenses and credit losses to vary significantly from our current expectations. Although Treasury’s funds under the senior preferred stock purchase agreement permit us to remain solvent and avoid receivership, the resulting dividend payments are substantial. Given our expectations regarding future losses
and draws from Treasury, we do not expect to earn profits in excess of our annual dividend obligation to Treasury for the indefinite future. As a result of these factors, there is significant uncertainty as to our longterm financial sustainability.
In addition, there is uncertainty regarding the future of our business after the conservatorship is terminated, including whether we will continue in our current form, and we expect this uncertainty to continue. On April 14, 2010, the Obama Administration released seven broad questions for public comment on the future of the housing finance system, including Fannie Mae and Freddie Mac, and announced that it would hold a series of public forums across the country on housing finance reform. Treasury Secretary Geithner testified in March 2010 that the administration expects to present its proposals for reform to Congress “next year.” We cannot predict the prospects for the enactment, timing or content of legislative proposals regarding longer-term reform of Fannie Mae, Freddie Mac and the Federal Home Loan Banks (the “GSEs”).
Talk about throwing good money after bad.
Fannie and Freddie’s uncertain future – FT Alphaville
Fannie Mae’s insatiable appetite for bailout cash – FT Alphaville
GSE losses could stand at $448bn, Amherst says – FT Alphaville
Fannie, Freddie and FAS 166/167 – FT Alphaville