Fannie Posts $72 Billion Loss for '09

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Fannie Mae reported a staggering $72 billion net loss for 2009, underscoring the challenges that still face the nation's largest mortgage financier and offering more grim news for taxpayers who may ultimately pick up the bill.

The Washington-based company posted a $15.2 billion fourth-quarter loss and said it asked the U.S. Treasury for another $15.3 billion to stay afloat, bringing its total bailout tab past $76 billion. The quarterly results were an improvement from the year-ago period, when Fannie reported a $25.2 billion loss, but the annual loss surpassed the year-earlier loss of $58.7 billion.

The Fannie Mae earnings release came days after Freddie Mac, its smaller competitor, reported smaller losses. Freddie Mac posted a fourth-quarter net loss of $6.5 billion, didn't ask for more bailout cash and posted a $21.6 billion loss for 2009, down by more than half from a year earlier.

Freddie's results have been better, in part, because it has a smaller loan book that has been performing better than Fannie's. But some analysts warn that Freddie's losses could rise.

Fannie's losses were driven by $11.9 billion in credit expenses, including souring loans and costs from maintaining a growing stable of foreclosed properties. Fannie also took a $5 billion write-down on low-income tax-credit investments after the government said it wouldn't allow the company to sell them. Those tax credits are worthless to Fannie but could result in lower tax revenues for the government if they are sold.

The housing market has shown signs of stabilizing in recent months, but Fannie said that unemployment and continued defaults from many borrowers who owe more on their mortgages than their homes are worth meant that losses would continue through 2010, though at lower levels.

While some analysts warn that efforts to modify loans are simply postponing foreclosures and delaying losses, Fannie Chief Executive Michael Williams said the company remained committed to preventing foreclosures. "Our overriding objective is keeping people in their homes whenever possible," he said in a statement.

The government took over Fannie and Freddie nearly 18 months ago as rising loan defaults burned big holes in the companies' balance sheets. The government has agreed to absorb unlimited losses for the next three years and up to $400 billion after that. So far, the companies have taken a combined $127 billion in Treasury support, making this bailout one of the most expensive from the financial crisis.

The government has relied heavily on the companies to help heal broken housing markets, and they are at the center of the Obama administration's initiatives to rework loans for millions of troubled borrowers to avoid foreclosures.

The Obama administration said this past week that it wouldn't propose legislation to revamp the troubled wards of the state until next year. At a Senate hearing on Thursday, Federal Reserve Chairman Ben Bernanke said it was "very important that we move towards clarifying the longer-term status" of the companies.

He warned against any overhaul that might reconstitute the "platypus"-like, public-private hybrid structure that defined the companies before conservatorship, and he said that privatizing the firms would be an "interesting direction" to take.

Write to Nick Timiraos at ... s_business