First Quarter Reports Fannie Mae Foreclosure Figure Almost Double
The Federal National Mortgage Association (FNMA), popularly known as Fannie Mae, is a Government Sponsored Enterprise (GSE) and its main business is to purchase and securitize mortgages in real estate, with a view to make available funds to lending institutions for financing home buyers in US, particularly in low and medium income group.
Fannie Mae generates income through interest rate differences between its funding to the lending institutions and interest on mortgage securities it holds as investments. Additional income is also derived through it, significantly from guarantee fees for assuming the credit risk on mortgage loans guaranteed by it. According to estimates, Fannie Mae’s mortgage portfolio was in excess of $700 billion, as of August 2008.
Fannie Mae and another GSE – Freddie Mac – although not entirely backed by the US Government through its Treasury Department, were certified as “playing a central role in the US housing finance system”, to alley the market fears by the Government, when the devastating foreclosure crisis hit the country in 2007.
The impact of foreclosure crisis has uprooted many financial institutions, in declaring bankruptcy and still more to follow suit, thus eroding public confidence on the credibility of the financial system presently.
With this back-story, now the disturbing news is Fannie Mae’s holding properties foreclosed for default in mortgage repayments, nearly doubled from what they were in 2009. The quarterly report on earnings of Fannie Mae, pertaining to the first quarter ended March 2010, in its single-family portfolio, the foreclosure rate soared to 1.36 percent, up from the reported 0.55 percent during 2009.
The holdings of Fannie Mae in its single-family portfolio were more than $11.4 billion in the first quarter of 2010, up from the figure of $6.2 billion, during the same period of last year.
The financial loss of Fannie Mae, as reported in the first 3 months of 2010 was $11.5 billion and the GSE has requested an aid of $8.4 billion of the tax-payers’ money from the Treasury Department. As regards foreclosure volume, from 62,000 properties in 2009, it went up to more than 109,000 properties presently and at the beginning of the period under review it stood at 86,000 properties.
Foreclosure properties held by Fannie Mae were contributed region-wise as follows: Southeast region of US contributed the most by 17,700 properties; Midwest region 15,000 properties; Southwest 12,800; West 12,600 and last by 3,500 from Northeast region.
In the quarterly analysis report under review, Fannie Mae states that consequent to the foreclosure moratoria adopted by the market, the levels of foreclosures were impacted during the first 6 months of 2009 to be less. The report adds “The continued weak economy and high unemployment rates, as well as the prolonged decline in home prices on a national basis, continue to result in an increase in the percentage of our mortgage loans that transition from delinquent to foreclosure status and significantly reduced the values of our foreclosed single-family properties”.
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[...] In the quarterly analysis report under review, Fannie Mae states that consequent to the foreclosure moratoria adopted by the market, the levels of foreclosures were impacted during the first 6 months of 2009 to be less. The report adds “The continued weak economy and high unemployment rates, as well as the prolonged decline in home prices on a national basis, continue to result in an increase in the percentage of our mortgage loans that transition from delinquent to foreclosure status and significantly reduced the values of our foreclosed single-family properties”. Read More.. [...]