Tuesday, August 11, 2009

Fannie's Failings (FRE; FNM)

Fannie was recently up 17%, Freddie's up .6%. From Forbes:
The bigger of the two government-controlled mortgage financiers looks to be in bigger trouble.

While many consider government-controlled lenders Fannie Mae and Freddie Mac nearly identical, their most recent quarterly reports suggest that Fannie is in more trouble.

Though smaller Freddie Mac ( FRE - news - people ) has received more aid--$50 billion--since the two were pulled into conservatorship last fall, Freddie didn't require any taxpayer money after its second quarter report. It actually made money, $768 million. Fannie Mae ( FNM - news - people ), in contrast, needed to ask for $10.7 billion in government aid after a $14.8 billion loss, bringing its total government support to $46 billion. True, an accounting change kept Freddie out of the red, but Fannie caught that break, too.

Expected losses for Fannie and Freddie, which own or guarantee $5.5 trillion in U.S. mortgage debt, have surged since they were seized. Since then, the economy has deteriorated significantly, with unemployment hitting 9.4% in July. Sliding real estate values, off 34% since their peak three years ago, have been particularly costly for the two giants.

While it's been assumed that Fannie would ultimately lose more money, in real terms, since it's about a third larger than Freddie, new quarterly data suggests that pound for pound, Fannie is going to end up costing taxpayers a lot more....MORE