Washington-based mortgage giant Fannie Mae reported a loss of $3.55 billion, or $3.80 per share for the fourth quarter of 2007 due to the high numbers of foreclosures.
“2007 was a tough year, 2008will be tough as well, and 2009 we do not anticipate will be rosy,” said Fannie Mae President and Chief Executive Officer Daniel H. Mudd in a call with investors and analysts.
During the same period in 2006, the company had profits of $604 million, or 49 cents per share.
Fannie Mae stressed its “prudent” approach to “conserve capital” in the interim in order to hedge against more defaults. “The No. 1 priority is capital,” said Mudd.
Federal Reserve Chairman Ben Bernanke repeated the sentiments on Capitol Hill on Tuesday. “We would certainly encourage them [Fannie Mae and Freddie Mac] to raise capital,” Bernanke testified before the U.S. House Financial Services Committee. For all of 2007, Fannie Mae had a net income loss of $2.05 billion, or $2.63 a share, while the previous year saw profits of $4.05 billion, or $3.65 per share. Fannie Mae “will continue to have trouble with both credit losses and capital levels,” said Paul Miller, an analyst at Friedman Billings Ramsey & Co. in Arlington.
The Office of Federal Housing Enterprise Oversight, which monitors Fannie Mae, announced Wednesday that it would eliminate the cap placed on its portfolio in 2006.
Fannie Mae’s portfolio is valued at about $724 billion, and the cap was raised to $735 billion on Sept. 19 last year, with a 2 percent increase over the next year.
McLean-based Freddie Mac, which was under a similar cap until the announcement, will release its financial report today. Freddie Mac posted losses of $2.02 billion in the third quarter.
The cap had been imposed after $11.3 billion in accounting errors for the two companies were discovered.
“In recognition of the progress being made by both companies, as indicated by the timely release of their 2007 audited financial statements, and consistent with the terms of the relevant agreements, OFHEO will remove the portfolio growth caps for both companies on March 1, 2008,” Office of Federal Housing Enterprise Oversight Director James B. Lockhart said in a statement.
Bloomberg News contributed to this report.
