Fannie Mae seeks another $10.7 billion in U.S. aid

Associated Press

Fannie Mae is seeking an additional $10.7 billion in government aid after posting another massive quarterly loss as the taxpayer bill from the housing market bust keeps growing.

The mortgage finance company, seized by federal regulators in September, posted a second-quarter loss of $15.2 billion, or $2.67 per share, including $411 million in dividend payouts.

That compares with a loss of $2.6 billion, or $2.54 per share, a year earlier.

The government, which seized control of Fannie Mae and its sibling Freddie Mac in September, has already spent about $85 billion to prop up the two companies.

Fannie Mae's new request from the Treasury Department will bring the total to nearly $96 billion. Freddie Mac is expected to report its quarterly results today.

"We are dependent on the continued support of Treasury in order to continue operating our business," Fannie Mae said in a Securities and Exchange Commission filing late Thursday.

The results were driven by $18.8 billion in credit losses that were due to declining housing market conditions made worse by rising unemployment.

Nearly 4% of the loans Fannie Mae owns or guarantees were delinquent as of June 30, up from 1.4% a year earlier.

Fannie Mae and Freddie Mac play a vital role in the mortgage market by buying loans from banks and selling them to investors.

Together, Fannie and Freddie own or guarantee almost 31 million home loans worth about $5.4 trillion.

That's about half of all U.S home mortgages.

The two companies lowered their standards for borrowers during the real estate boom and are reeling from the bust.

High-risk loans, now defaulting at a record pace, have come back to haunt the companies.

Worse still, the recession is causing formerly reliable homeowners with good credit to default.

The Obama administration is expected to unveil its plans for Fannie and Freddie early next year.

Options being considered include keeping the companies private, winding down their operations, merging them into a federal agency or separating out their bad mortgage assets into a new company backed by the government.

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