Tuesday, May 06, 2008

Bad News from Fannie Mae today

The GSE lost another $2.2 billion. It is not clear to me whether this includes new accounting treatment for bad loans--if it is no long considering loans that are 120 days late to be impaired, the number is even worse than it looks.

At least this will compel Fannie to cuts its dividend and raise capital.


Anonymous said...

Virtually all new mortgages must be insured by a GSE before foreign savers will buy securitized bundles of them. The implied promises are getting very large.

Anonymous said...

Shareholder equity is now negative, and credit-default swaps on Fannie Mae increased 5 basis points to 48 (credit quality is deteriorating). $56.1 billion in Level 3 assets have been admitted (these assets mostly cannot be sold, so the value is a wild guess). Fannie and Freddie guarantee 40% of mortgages, and now they will be asked to guarantee many more.

This will potentially be one expensive bailout if new mortgage money is not loaned to people who will pay it back.

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