Fannie, Freddie Narrow Losses, But Want More Government Aid

NEW YORK -- Fannie Mae and Freddie Mac, the troubled mortgage giants taken over by the federal government, reported improved earnings last quarter as losses abated and soured mortgages continued to decline. But the firms, still 79 percent owned by the U.S. government, say they will need another $3.1 billion, largely to cover payments to taxpayers.

Fannie Mae reported $73 million in income for the last three months of the year, its first quarterly profit off operations since 2007, financial disclosures show. That income was erased by a $2.2 billion payment to the U.S. Treasury. The firm's regulator requested $2.6 billion from taxpayers, which would be used to repay taxpayers for their ongoing investment and fund the company with cash for the coming months.

Freddie Mac reported a $113 million loss in the fourth quarter, a significant improvement from the three-month period ending in September in which the mortgage-finance firm reported a $2.5 billion loss. Its regulator, which it shares with Fannie Mae, requested $500 million from the Treasury to help pay the $1.6 billion it owes taxpayers for their investment in the firm.

So, in effect, Fannie and Freddie are asking for money to pay down debt owed to the same parties from which they're requesting those funds.

For the year, Fannie recorded a $14 billion loss, down from its $72 billion loss in 2009. Freddie also reported a $14 billion loss last year, compared to a $22 billion loss the year before.

The mortgage giants have drawn down nearly $156 billion from the Treasury, with about $20 billion of that going back to taxpayers to pay the dividends on the shares owned by the federal government.

The firms, which own or guarantee more than half of all U.S. residential mortgages, could end up requesting as much as $363 billion through 2013, according to an October report by their regulator, the Federal Housing Finance Agency. Excluding dividend payments to the Treasury, they could cost taxpayers as much as $259 billion, the report noted.

The firms forecast lower home prices this year, according to their annual filings with the Securities and Exchange Commission, in line with most analysts' expectations that the housing market will continue to limp along.

Fannie forecasts a slight decline in home prices before they stabilize later this year, with values falling as much as 5.5 percent based on their own internal price index. Freddie Mac is less specific, simply projecting that home prices on a national basis will be lower this year than in 2010.

Separately, Freddie Mac disclosed that one of its top executives, Donald J. Bisenius, received a notice from the SEC that it intends to file civil charges against Bisenius. The Feb. 10 notice, disclosed in the firm's annual report, said the law enforcement agency's staff is preparing to recommend charges based on alleged violations of federal securities laws that occurred in 2007 and 2008.

Bisenius is at least the second top current or former Freddie official to have received such a notification from the SEC. The firm's former chief financial officer, Anthony "Buddy" Piszel, stepped down from his current employer, CoreLogic Inc., upon the firms disclosing that Piszel received the notice. The SEC has been investigating Freddie Mac for some time, securities filings show.

*************************

Shahien Nasiripour is a business reporter for The Huffington Post. You can send him an e-mail; bookmark his page; subscribe to his RSS feed; follow him on Twitter; friend him on Facebook; become a fan; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455.

Comments

[Peanut Santiago]

12:21 AM on 02/28/2011

"So, in effect, Fannie and Freddie are asking for money to pay down debt owed to the same parties from which they're requesting those funds."

???????????????????

Is it me or is this ridiculous?

[mike dougles]

06:16 PM on 02/27/2011

Rep Barney Frank said Fannie and Freddie are fine going forward, so dont ever ask why they still need a bailout, barney has spoken.

[tribilin219]

12:03 PM on 02/27/2011

Shut this money pit down! what is it with these people in Washington? don't they hear the people telling them no more of these games?

[AZreb]

10:09 AM on 02/27/2011

No - no - no - a thousand times no! Throwing money down a bottomless pit is worse than throwing a penny in a wishing well or a fountain - at least you get the hope of a wish granted.

If the government owns 79% of Fannie and Freddie and cannot make a profit, what does that tell you? Tells me the government can't handle finances worth a darn - so why give them more of our tax dollars to throw away?

[OneAmericanRants]

02:26 AM on 02/27/2011

The articles states: "So, in effect, Fannie and Freddie are asking for money to pay down debt owed to the same parties from which they're requesting those funds."

Does anyone else see how ludicrous this is? That's like us going to the bank we borrowed from to buy a car and saying, "Give me a loan, so I can repay the auto loan."

Let them fail. There is nothing that is too large to fail. Let 'em fail.

[G52]

01:47 AM on 02/27/2011

Fannie and Freddie - No more aid!

Break up the bank monopoly, the Federal Reserve, and bring back Glass - Steagall

[Peanut Santiago]

12:40 AM on 02/28/2011

Something INTELLIGENT, REASONABLE, and GOOD for the country will NOT be done.

Not as long as the politicians (of both parties) are bought and paid for by the oligarchs.

[Reaganitetoo]

10:04 PM on 02/26/2011

The really sad part is that these two HUGE failures are due to government interaction. When the banks were told by the fed, (in the late 70's) to loan money to people who never were going to be able to pay it back, they avoided law suits and court actions by forming these two and buying up all that bad paper. They knew they could get bailed out in the end but it got way out of controll and failed all at once because, just like the "budget" they didn't know when to stop spending.

[trussia1]

10:36 PM on 02/26/2011

Nah, only the wallstreet CEO's could create a Financial Hurricane # 5 like this one. Freddie and Fannie Mae took orders from Wallstreet even if they didn't want to. But this was how wallstreet was doing business at that time and may still be.for that matter. We need at least one of those CEOs go to prison.That would be the end of this business model for a very long time.Now that'st a regulation you can believe in

[Reaganitetoo]

11:20 PM on 02/26/2011

Sorry but this all started with Jimmy C and "affordable housing" When the fed told banks to loan the money regardless. Another catostrophic democrat failure, and up untill two years ago the Worst POTUS ever.

[Reaganitetoo]

09:51 PM on 02/26/2011

Giving them tax money to pay off Bwarney, Dodd and all the others to pay off the government. Sounds a great deal like money laundring to me and someone is geting fat in the process and US taxpayers are getting screwed.

[AZreb]

10:10 AM on 02/27/2011

Yep and without even a kiss!

[mezcal]

06:39 PM on 02/26/2011

Read the bolded part under "Fannie Mae Guaranty" very carefully.

http://www.efanniemae.com/syndicated/documents/mbs/mbspros/SF_March_1_2002.pdf

Doesn't get much clearer than that.
Any investor, including Bernanke, who failed to grok that has zero business whining to the taxpayer now.

Timmy needs to pull the Treasury guarantee from these fraud factories and BK them or the government itself is going to follow them down the drain.

[AZreb]

10:12 AM on 02/27/2011

Timmy and some other cabinet members are about as worthless as teats on a goldfish. Don't look for him to do anything that will upset the applecart (money cart) of the financial institutions.

[tristrixi]

05:37 PM on 02/26/2011

Hey, man. Come on, loan me some money so I can pay off last week's loan!

The rub is the Treasury must borrow the money at interest, which we all pay for via taxation, in able for the loans to take place. And why not? As the Treasury announces intent to borrow money from the Federal Reserve, the Fed then announces which Treasury Note offering at auction they plan to purchase.

This announcement then allows the private financial houses on Wall St. to buy these treasury notes prior, and then resell them to the Fed and a profit which is paid for by the taxpayers. Oh, by the way, these taxpayers exclude the minority at the apex of the pyramid, such burdens aren't applicable to that 1%. Ho hum, on and on...retch.

[Ordinary Citizen]

04:54 PM on 02/26/2011

lets see...your credit score is -987 and your financial stability is under zero ....and your asking for more money? No, nada, no, not now, not ever, never, no, no, no. And...NO! Sorry but...NO. Oh did I say it right? NO. Wait....NO. Give us your keys.. your out...gone....no.

[trussia1]

09:59 PM on 02/26/2011

yeppers, it's one of the featured benefits of the New American Normal.

[cats530]

11:01 AM on 02/26/2011

"We are confident that the terms of the arrangement will be promptly made public for everyone interested to remove any doubt there is any preferential behind the scenes dealing in allowing the former GC to fly anywhere he chooses on a taxpayer's dime (speaking of, BofA, how is that TLGP repayment coming? Ahead of schedule? Behind?). But far more important than the CEO's private jet arrangements, is the following blurb hidden deep inside the bowels of the paperweight:"our agreements with the GSEs and their first mortgage seller/servicer guides provide for timelines to resolve delinquent loans through workout efforts or liquidation, if necessary. In the fourth quarter of 2010, we recorded an expense of $230 million for compensatory fees that we expect to be assessed by the GSEs as a result of foreclosure delays."

http://www.zerohedge.com/article/brian-moynihan-latest-entrant-10b-5-fraud-club-after-misrepresenting-foreclosure-halt-damage

[carmenalex]

09:42 AM on 02/26/2011

i thought it was the unions fault..

[Jon Dorian]

09:12 AM on 02/26/2011

"...the firms, still 79 percent owned by the U.S. government, say they will need another $3.1 billion, largely to cover payments to taxpayers."

So, they want more tax money to pay back tax money? What a shell game this is!

Cut the losses and shut them down; it will be cheaper for the taxpayers.