Fannie Mae reports $8.69B loss for quarter 1

WASHINGTON -- Mortgage buyer Fannie Mae reported a loss of $8.7 billion for the January-March quarter and asked for an additional $8.5 billion in federal aid.

The new request is more than three times the $2.6 billion in government aid it sought in the final three months of last year.

The loss was caused by declining home prices around the country, Fannie Mae said. It said prices declined on average 1.8 percent, leading more homeowners to default on loans that the mortgage giant had guaranteed.

The government rescued Fannie Mae and sibling company Freddie Mac in September 2008 to cover their losses on soured mortgage loans.

It estimates the bailouts will cost taxpayers about $259 billion.

Fannie Mae's January-March loss attributable to common shareholders works out to $1.52 per share. It takes into account $2.2 billion in dividend payments to the government. That compares with a loss of $13.1 billion, or $2.29 per share, in the same period last year.

Fannie and Freddie buy home loans from banks and other lenders, package them into bonds with a guarantee against default and sell them to investors around the world.

When property values drop, homeowners default -- either because they are unable to afford the payments or because they owe more than the property is worth. Because of the guarantees, Fannie and Freddie must pay for the losses.

The losses incurred in the first three months of the year are related to loans that were extended before 2009, Fannie Mae said. The company expects to make money on home loans that it acquired since January 2010.

Fannie Mae, based in Washington, and Freddie Mac, based in McLean, Va., own or guarantee about half of all mortgages in the U.S., or nearly 31 million home loans worth more than $5 trillion. Along with other federal agencies, they backed nearly 90 percent of new mortgages over the past year.

The government has spent roughly $154 billion so far bailing out Fannie and Freddie.