Fannie Mae asks dear old Uncle Sam for $19 billion

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Fannie Mae (FNM) hit investors today with a double whammy.

Not only did the largest U.S. mortgage lender report a whopping loss of $23.5 billion, or $4.09 per share, a slight improvement over a year earlier, but its regulator requested $19 billion in additional help from the federal government before June 30. First quarter results -- if you can call them that -- included $20.9 billion in credit-related expenses, securities impairments of $5.7 billion, and fair value losses of $1.5 billion, as persistent deterioration in housing, mortgage, financial and credit markets hurt the company.

"Taking into account a decrease in unrealized losses on available-for-sale securities, the loss
resulted in a net worth deficit of $18.9 billion as of March 31, 2009," according to the company. The $19 billion funding request needed to eliminate the net work deficit will be made under the terms of Senior Preferred Stock Purchase Agreement between Fannie Mae and the Treasury.

Investors -- the few that still care -- were pleased. Shares of Fannie Mae rose fractionally in early trading. The shares, worth about 89 cents, have gained 16 percent this year.

Earlier this week, The Wall Street Journal reported on a study that found that the downturn in home prices has left about 20% of U.S. homeowners are underwater, owing more on a mortgage than their homes are worth. Billionaire Eli Broad recently argued that additional inducements including rates below four percent are needed to sell the glut of foreclosed properties, including Bloomberg News.

The problems at Fannie Mae and Feddie Mac (FRE) underscore the vexing challenge the Obama administration faces in reviving the moribund housing market. Though sales have been picking up in some regions because in foreclosures, many experts do not see a turnaround until lat least next year.
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