The other shoe drops: Fannie Mae reports MASSIVE 3Q loss of $18.9 Billion and asks govt for another 15B bailout; Fannie Mae rolls out ‘Deed for Lease’ program renting foreclosed homes to owners…


Update: The other shoe just dropped. I am guessing FAN didn’t roll out this Deed for Lease program out of the goodness of their hearts, they turned around and announced a MASSIVE 3Q loss and need ANOTHER 15B from Treasury:


The latest particular does of lunacy and economic calamity coming out of the intellectual midgets at Fannie and the FHA should be sufficient to push the market well into 1,100 territory tomorrow. FNM’s loss for Q3 is $18.9 billion, up from $14.8 billion in Q2, a time when the market was up a good 15%: ever wonder who keeps on subsidizing those gain? That’s right – you. Credit-related expenses increased to $22 billion in Q3 from $18.8 billion in Q2. Oh, and Fannie now wants another $15 billion rescue from the Treasury (which is having some troubles with getting that pesky debt ceiling raised to one googol) so it can continue with its plan of keeping shadow inventory away from the market, rent foreclosed houses to their owners at staggeringly low rates, and continue the pretense that bank’s balance sheets are well capitalized. Seriously, is the twilight zone any more palatable if one just drinks the Kool Aid or takes some crazy pill? We are ready and willing for the plunge.From the just released results by bankrupt Fannie Mae:

WASHINGTON, DC – Fannie Mae (FNM/NYSE) reported a net loss of $18.9 billion in the third quarter of 2009, compared with a loss of $14.8 billion in the second quarter of 2009. Including $883 million of dividends on our senior preferred stock held by the U.S. Department of Treasury, the net loss attributable to common stockholders was $19.8 billion, or ($3.47) per diluted share, in the third quarter of 2009, compared with a loss of $15.2 billion, or ($2.67) per diluted share, in the second quarter of 2009. Third-quarter results were largely due to $22.0 billion of credit-related expenses, reflecting the continued build of the company’s combined loss reserves and fair value losses associated with the increasing number of loans that were acquired from mortgage-backed securities trusts in order to pursue loan modifications.

The loss resulted in a net worth deficit of $15.0 billion as of September 30, 2009, taking into account unrealized gains on available-for-sale securities during the third quarter. As a result, on November 4, 2009, the Acting Director of the Federal Housing Finance Agency (FHFA) submitted a request for $15.0 billion from Treasury on the company’s behalf. FHFA has requested that Treasury provide the funds on or prior to December 31, 2009…..

Update on status of Fannie Mae’s HAMP/Making Home Affordable applications (HousingWire) :

(…) Fannie said as of the end of Q309, it had 487,000 trial modifications in progress through the Making Home Affordable Modification Plan (HAMP) and it has met the Treasury Department’s goal of 500,000 modifications in process by November 1.

Total loan workouts for Q309 totaled 49,000, including 28,000 loan modifications, compared with 41,000 workouts, including 17,000 modifications, during Q209.

“Even though the volume of trial modifications that we have initiated on Fannie Mae loans under the Home Affordable Modification Program has been substantial, a low percentage of our trial modifications had converted into completed loan modifications as of September 30, 2009,” Fannie Mae said. “One reason is that activity under the program has been increasing over time, so that many loans have not had enough time to complete the trial modification period prior to September 30, 2009.”

Also on Thursday, Fannie announced a new program that will allow new deed-in-lieu program that allows the borrower to sign a lease to rent their home from Fannie Mae in exchange for the voluntary transfer of the property back to the lender….


AFP PHOTO/Paul Richards

Our previous posts on housing are numerous, start here.  Our post on Barney Frank’s proposal to do something similar to what Fannie is announcing today, but through government loaning money to homeowners then the homeowners paying their mortgages with it (thereby padding banks profits and adding loads of red tape) via legislation here.

The outlook on Fannie default rates here. Our most recent post on the housing forecast and the double dip foreclosure crisis tied to unemployment and option ARMS (interest only etc) here.

At first blush I am sure this seems like one more government spending plan interfering with the housing market’s ability to correct. And it is, I agree, BUT since Team TOTUS has failed to address housing in a successful way (we were behind a HOLC under which we would have paid for these houses ONCE, also see here the TARP oversight panel’s review of MakingHomeAffordable) further action is required.

And, since Congress and Team TOTUS are well on their way to collapsing our economy with over regulation and spending, this actually seems like something that might achieve what they have not, a program to curb the impact of the economic collapse on families. If Team TOTUS keeps our economy in a ditch we need to pitch a tent over families to weather the storm….


Fannie Mae plans to allow homeowners facing foreclosure to stay in their homes and rent them for up to one year as part of the latest effort to help troubled borrowers while keeping a glut of foreclosed properties from hitting the housing market.

The Deed for Lease Program, which Fannie plans to roll out on Thursday, will offer borrowers who fail to complete or don’t qualify for a loan modification or other workout to deed their property to the lender in exchange for a lease. Borrowers-turned-tenants will be able to sign leases of up to 12 months and will pay market rents, which in most cases are lower than the cost of mortgage payments.

Fannie Mae wouldn’t say how many homeowners it expects will take advantage of the program. The company acquired 57,000 properties through foreclosure during the first half of the year, bringing its total real-estate owned inventory to 63,000 properties valued at $6 billion. The rental program will allow Fannie to hold inventory off of already saturated housing markets and makes a bet that the housing market will be stronger one year from now.

“If you keep more people in their homes, it’s better for the community. It’s better for the financial institutions that own those homes,” says Jay Ryan, vice president of equity investments at Fannie Mae. “Hopefully less foreclosure product on the market will help stabilize those communities.”

Borrowers who haven’t missed any mortgage payments aren’t eligible for the program, and the borrower’s mortgage servicer would have to show that a borrower isn’t eligible for a loan modification before the homeowner could apply for the Deed for Lease program.

“I’m sure Fannie is hoping that when they sell the properties, the values will be higher,” says David Berson, chief economist for PMI Group Inc., a private-mortgage insurer. “A year from now, we should be a year further into the economic recovery, and housing demand will be stronger…That will allow you to release homes that have been foreclosed upon but not put on the market.”

The program could also help Fannie preserve the value of its nonperforming assets because occupied homes are more likely to hold up better that vacant homes . The rental programs also provide some rental income to the government-backed mortgage finance giants...(Go read the whole piece!)

Other Resources:
Making Home Affordable Treasury Program
e.Fannie (servicer updates)
HUD- Department of Housing & Urban Devlopment
Fannie Mae mortgage customers call Fannie Mae at 1-800-7FANNIE (1-800-732-6643) or
Freddie Mac mortgage customers call Freddie Mac at 1-800-FREDDIE (1-800-373-3343) or
VA mortgage customers (thank you for your service) vall VA Financial Counselors at 1-877-827-3702 or
Hope Now Alliance (Hank Paulson’s Plan) 1-888-995-4673 or

November 5, 2009. Tags: , , , , , , , , , , , , , , , , , , , , . Economy, Finance, Foreclosures, Housing, Obama Administration, Politics, Unemployment Statistics, Wall St.


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  6. Nicole replied:

    How does Deed-for-Lease a “government spending plan interfering with the housing market’s ability to correct”? It seems that it would cost the government — and taxpayers — nothing. And allowing (underwater) homeowners to turn their deeds back to Fannie Mae doesn’t seem to interfere with the market.


    • ginaswo replied:

      the ninventory slowdown is the problem
      I am for it if they frakkin DO IT
      but they are holding TONS of homes just short of the REO inventory, newer story is on page one


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