UPDATE: Fannie Mae Loses $29 Bln On Tax, Mortgage Charges
Monday November 10th, 2008 / 16h28
By John Spence BOSTON (Dow Jones) -- Mortgage-finance giant Fannie Mae on Monday reported a $29 billion third-quarter loss as the company continued to get slammed by the housing crunch and the upheaval in credit markets. Fannie Mae (FNM), which has been placed in conservatorship by the government, said its third-quarter loss jumped to $29 billion, or $13 a share, from a loss of $1.4 billion, or $1.56 a share, in the year-ago period. The company blamed the loss primarily on a $21.4 billion non-cash charge to establish a valuation allowance against deferred tax assets, as well as $9.2 billion in credit-related expenses arising from the ongoing deterioration in mortgage credit conditions and declining home prices. Credit-related expenses rose to $9.2 billion from $5.3 billion in the second quarter. The increase was driven by higher charge-offs in the mortgage business. The company boosted its mortgage loss reserves by $6.7 billion. Combined loss reserves to cover expected charge-offs were $15.6 billion at quarter-end, up from $8.9 billion at the end of the second quarter. Net investment losses rose to $1.6 billion from $883 million quarter-over-quarter, the firm said. Meanwhile, net fair-value losses jumped to $3.9 billion from $517 million. "The primary drivers were $2.9 billion in trading securities losses arising from a significant widening of credit spreads, and $3.3 billion in derivatives losses driven by interest rate declines, partially offset by gains on hedged mortgage assets," Fannie Mae said. The company makes money by packaging mortgages into securities and selling them, but that business has been hit hard during the credit storm. Total nonperforming assets rose to $71 billion from $52 billion at the end of the second quarter. In September, Fannie Mae began operating under the conservatorship of the Federal Housing Finance Agency.
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