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Fannie Mae Seeks $7.8 Billion in Aid After Reporting Loss

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Nov. 8 (Bloomberg) -- Fannie Mae, one of two mortgage companies operating under U.S. conservatorship, said it will seek $7.8 billion in Treasury Department aid after reporting a third-quarter loss.

The government-sponsored enterprise had a net loss of $5.1 billion for the three-month period that ended Sept. 30, driven by defaults on loans made before 2009 and derivative losses linked to a decline in interest rates, according to a Securities and Exchange Commission filing today.

“Fannie Mae is working to reduce losses on our legacy book and limit taxpayer exposure,” Susan McFarland, the company’s executive vice president and chief financial officer, said in a statement.

Washington-based Fannie Mae and smaller rival Freddie Mac of McLean, Virginia, have survived on Treasury aid since they were seized by the federal government in September 2008 amid subprime mortgage losses that pushed them toward insolvency.

The $7.8 billion aid request reported by Fannie Mae today includes $2.5 billion that will be repaid to Treasury in the form of dividends on the U.S. stake. The borrowing brings the company’s total draw to $112.6 billion, of which $17.2 million in dividends has been returned to the government.

Increasing Losses

The third-quarter loss was up from $3.5 billion a year earlier. In August, the company reported a $2.9 billion loss for the second quarter of this year.

Fannie Mae’s revenue continues to grow as it works pre-2009 loans off its books, according to today’s filing. Nearly half of the mortgage guarantees now on the company’s books are for loans made since 2009, which carry larger fees and have stronger borrower profiles.

Borrowers 90 or more days behind on their payments have decreased every quarter since the beginning of 2010 and now are about 4 percent of the company’s portfolio of single-family loans, according to the filing.

Under a stock purchase agreement with the Treasury Department, Fannie Mae and Freddie Mac pay a 10 percent dividend in exchange for taxpayer support. With today’s request by Fannie Mae, the two companies have drawn about $185 billion and returned about $32 billion in dividends, for a total net cost to taxpayers of about $153 billion.

Freddie Mac last week reported a $4.4 billion loss for the third quarter and said it will seek $6 billion from Treasury.

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net

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