Mortgage News

When the official figures came out today regarding the size of the loss Fannie Mae experienced in the 2nd Quarter of 2008, it blew earlier estimates out of the water. The official loss for Q2 is $2.3 Billiion, about four times higher than what analysts had expected. Interestingly enough, the market is hardly even noticing, as the Dow is up 2% at this hour.

“Our second quarter results reflect challenging conditions in the housing and mortgage markets that began in 2006 and have deepened through 2007 and 2008,” said Daniel H. Mudd, president and chief executive officer. “Fannie Mae is providing stability and liquidity to the housing market in the United States, and we will continue to play a key role as the market recovers from this cycle. We have already undertaken a series of initiatives, including raising more than $7 billion in additional capital in the second quarter, to help us manage through the most difficult U.S. housing market in more than 70 years.

"Volatility and disruptions in the capital markets became even more pronounced in July. In addition, credit performance has continued to deteriorate and, based on our experience in July, we anticipate further increases in our combined loss reserves. Given this volatility and the build-up of our reserve, as well as the uncertainties inherent in the U.S. economy and the housing market, we are taking a series of additional actions that reflect our ongoing focus on conserving and enhancing our capital, as well as managing our credit risk through the balance of this cycle.”

Mudd's analysis seems accurate, perhaps even understated, but it also can hardly inspire confidence. Even though the overall market isn't noticing, shares in Fannie Mae are down 8% at this hour.