Nov. 10 (Bloomberg) -- Fannie Mae may need more than the $100 billion in funding pledged by the U.S. Treasury to stay afloat after reporting a record $29 billion loss and confronting more difficulty in issuing and refinancing debt.

``This commitment may not be sufficient to keep us in solvent condition or from being placed into receivership,'' if there are further ``substantial'' losses or if the company is unable to sell unsecured debt, Washington-based Fannie said in a filing today with the U.S. Securities and Exchange Commission.

Fannie said it has a limited ability to issue debt maturing past one year, citing market conditions, the lack of an explicit federal guarantee and competition from government-insured bank bonds. Fannie, which along with Freddie Mac was seized by regulators on Sept. 6, slashed the value of its assets by at least $21.4 billion for the third quarter and increased credit loss reserves by 75 percent to $15.6 billion. Freddie is required to file its quarterly earnings by the end of the week.

``Treasury may end up putting far more than $100 billion into these entities, especially if the housing market continues to decline,'' said Rajiv Setia, a fixed-income analyst at Barclays Capital in New York. ``There's just no way, no way'' Fannie and Freddie will emerge from conservatorship within the next two to three years, he said.

Fannie, like McLean, Virginia-based Freddie, needs constant access to the debt markets to fund purchases for its $761 billion portfolio and pay off debt as it matures. The company has more than $138.6 billion in short-term debt maturing over the next two months, according the filing. The cost of using derivatives to manage the interest-rate risks has also increased, Fannie said.

Record Net Loss

Fannie's financing agreement with the Treasury also constrains its ability to issue debt, capping the total outstanding amount at 110 percent of the balance as of June 30. Fannie estimates that limit as $892 billion. As of Oct. 31, Fannie had $880 billion in total debt outstanding.

In its first report since being taken over, Fannie today said its third-quarter net loss widened to $29 billion, or $13 a share, the largest for any U.S. company this year.

Chief Executive Officer Herbert Allison, the former head of TIAA-CREF, reduced most of Fannie's deferred tax credits, increased default estimates and raised credit loss estimates. The decisions cut Fannie's net worth by 79 percent and shows the new management is taking a dimmer view of the company's financial future than the team under former CEO Daniel Mudd.

``The earnings were gruesome,'' said Howard Shapiro, an analyst at Fox-Pitt Kelton Inc. in New York. ``They're trying to clean house.''

The company's net loss in the same period last year was $1.4 billion, or $1.56 a share. The fair value of assets fell to negative $46.4 billion, according to the filing.

Government Money

Fannie, which traded at almost $50 a share a year ago, fell 2 cents to 72 cents today in New York Stock Exchange composite trading. Fannie's stock market value slumped from $39 billion at the beginning of the year to about $4 billion as of Nov. 7, including the government's 79 percent stake.

Fannie slashed its net worth, or the difference between assets and liabilities, to $9.4 billion on Sept. 30 from $44.1 billion at Dec. 31. The company said today it may fall to negative net worth by the end of next quarter, requiring it to seek government funding. Fannie said today that it hadn't tapped any federal aid through Nov. 7.

The Federal Housing Finance Agency placed Fannie and Freddie under its control Sept. 6 and forced out management after examiners found their capital to be too low and of poor quality. Treasury Secretary Henry Paulson pledged to invest as much as $100 billion in each company as needed to keep their net worth positive.

Housing Market

The companies will need that money ``sooner rather than later,'' according to Paul Miller, an analyst at Friedman, Billings, Ramsey in Arlington, Virginia.

Fannie and Freddie, which own or guarantee about 40 percent of the U.S. home loan market, must also cope with the possibility that the housing slump may extend into a fourth year. Banks are still turning away borrowers and foreclosures are worsening the glut of unsold homes.

Lower property values will keep eroding home equity, causing consumers to retrench further. The S&P/Case-Shiller home-price index of values in 20 U.S. cities dropped 16.6 percent in August from a year earlier, the fastest pace on record. The index has been lower every month since January 2007.

Fannie today maintained its housing market forecasts, reiterating that home prices nationally will decline 15 percent to 19 percent from their peak in 2006 before they stabilize.

Sugarcoating

Fannie was created in the 1930s under Franklin D. Roosevelt's ``New Deal'' plan to revive the U.S. economy. Freddie was started in 1970. The companies were designed to expand homeownership and provide market stability. They make money by financing mortgage-asset purchases with low-cost debt and on guarantees of home-loan securities they create out of loans from lenders.

Fannie set aside $6.7 billion to cover delinquencies as home prices drop, up from $3.7 billion last quarter. The company also charged off $1.8 billion in securities losses it had previously categorized as temporary because executives had anticipated the assets would recover.

Credit-related expenses rose 74 percent to $9.2 billion from $5.3 billion last quarter, including the provisions for future losses.

``The new management team has no incentive to sugarcoat their earnings,'' Miller at Friedman, Billings said.

To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net

Last Updated: November 10, 2008 16:14 EST