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| Fannie Mae unveils loss of $2.3bn | Fannie Mae unveils loss of $2.3bn |
| (4 days later) | |
| Problems in the US housing market have pushed mortgage finance company Fannie Mae into the red. | Problems in the US housing market have pushed mortgage finance company Fannie Mae into the red. |
| The group sank to a net loss of $2.3bn in the three months to 30 June, against a profit of $1.97bn last year. | The group sank to a net loss of $2.3bn in the three months to 30 June, against a profit of $1.97bn last year. |
| It comes days after its sister company Freddie Mac posted worse-than-expected results and its top executive warned house price falls are not over yet. | It comes days after its sister company Freddie Mac posted worse-than-expected results and its top executive warned house price falls are not over yet. |
| Between them, the two government sponsored firms guarantee, nearly half of the nation's mortgage debt. | |
| Shares in Fannie Mae sank in the wake of the announcement, falling 9.8% to $8.98. | Shares in Fannie Mae sank in the wake of the announcement, falling 9.8% to $8.98. |
| Difficult market | Difficult market |
| As mortgage guarantors, Fannie Mae and Freddie Mac, must pay out when people default on their loans. | As mortgage guarantors, Fannie Mae and Freddie Mac, must pay out when people default on their loans. |
| But as a result of recent woes in the US housing market and subsequent sub-prime crisis the pair have run into severe difficulty. | But as a result of recent woes in the US housing market and subsequent sub-prime crisis the pair have run into severe difficulty. |
| Fannie Mae says it has the capital to weather the storm, but its looking more and more stormy by the day John Raines,Exclusive Analysis Check Fannie Mae's shares "> Q&A Freddie Mac and Fannie Mae | Fannie Mae says it has the capital to weather the storm, but its looking more and more stormy by the day John Raines,Exclusive Analysis Check Fannie Mae's shares "> Q&A Freddie Mac and Fannie Mae |
| Fannie Mae said that the current housing crisis had added to its woes to the tune of $5.3bn in credit expenses. | Fannie Mae said that the current housing crisis had added to its woes to the tune of $5.3bn in credit expenses. |
| The latest losses at the firm - which came in at more than three times analysts' estimates - followed a $2.2bn loss for the first three months of the year. | The latest losses at the firm - which came in at more than three times analysts' estimates - followed a $2.2bn loss for the first three months of the year. |
| "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 of Fannie Mae. | "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 of Fannie Mae. |
| Cost cutting | Cost cutting |
| He added that the firm had also taken steps to raise an additional $7bn to help it tackle the "most difficult US housing market in more than 70 years". | He added that the firm had also taken steps to raise an additional $7bn to help it tackle the "most difficult US housing market in more than 70 years". |
| As part of the plan Fannie Mae is slashing its dividend by more than 85% to 0.05 cents, raising its fees and has taken steps to cut its costs by 10%. | As part of the plan Fannie Mae is slashing its dividend by more than 85% to 0.05 cents, raising its fees and has taken steps to cut its costs by 10%. |
| The group also said it would stop purchasing 'Alt-A' loans - loans made to borrowers with good credit but little proof of their income, or people who either put down a small deposit, or no deposit, for their loan. | The group also said it would stop purchasing 'Alt-A' loans - loans made to borrowers with good credit but little proof of their income, or people who either put down a small deposit, or no deposit, for their loan. |
| But there was little to offer hope in near-term future with Fannie Mae warning that increased volatility in capital markets and deteriorating credit conditions meant that it would face more losses. | But there was little to offer hope in near-term future with Fannie Mae warning that increased volatility in capital markets and deteriorating credit conditions meant that it would face more losses. |
| Bail-out | Bail-out |
| Last month, the federal government offered a financial lifeline to the two beleaguered companies offering to extend their line of credit. | Last month, the federal government offered a financial lifeline to the two beleaguered companies offering to extend their line of credit. |
| However, the financial aid may leave the taxpayer facing a bill of $25bn over the next two years. | However, the financial aid may leave the taxpayer facing a bill of $25bn over the next two years. |
| "The taxpayer is stuck if they have to be bailed out," John Raines, deputy director of political risk for Exclusive Analysis told the BBC. | "The taxpayer is stuck if they have to be bailed out," John Raines, deputy director of political risk for Exclusive Analysis told the BBC. |
| He added that reports had suggested the actual cost could end up being anywhere in the region of between $10bn to $100bn. | He added that reports had suggested the actual cost could end up being anywhere in the region of between $10bn to $100bn. |
| "Right now, Fannie Mae says it has the capital to weather the storm, but its looking more and more stormy by the day." | "Right now, Fannie Mae says it has the capital to weather the storm, but its looking more and more stormy by the day." |