Published: Thu, February 15, 2018
Business | By Tara Barton

Fannie Mae to Require $3.7 Billion Government Cash Infusion

Fannie Mae to Require $3.7 Billion Government Cash Infusion

Government-sponsored enterprise Fannie Mae saw a fourth quarter net loss of $6.5 billion and will require an infusion of capital from the U.S. Treasury beyond the $3 billion capital buffer that its regulator, the Federal Housing Finance Agency, restored to its budget in January.

Under government conservatorship since the 2008 financial crisis, Fannie Mae officials said the Federal Housing Finance Agency, which oversees its operations, would pursue the taxpayer funds.

Due to the terms of its first taxpayer bailout, Fannie Mae operates with limited capital stores, which is why it can not pay for the loss on its own.

Fannie Mae reported a fourth quarter 2017 net loss of $6.5 billion, compared with net income of $3 billion in the third quarter.

Fannie Mae Chief Executive Officer Timothy J. Mayopoulos said in a statement that the company's underlying business is strong.

Fannie Mae, as well as Freddie Mac, is supposed to give almost all of its profits to the government as part of the terms of the government bailout.

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Despite taking a loss in its final quarter, Fannie Mae benefitted from improvements in the housing market - the home-price index increased 5.6 percent in the fourth quarter.

Due to the tax charge, Fannie Mae reported 2017 net income of $2.46 billion for 2017, down from $12.31 billion in 2016.

The loss is primarily a result of the tax reform bill passed in December: Tax credits Fannie Mae held on its balance sheet became worth less as a result of the adjustment in their value under the new tax code. Some members of Congress and other policymakers have said the companies should be replaced with a system that doesn't leave taxpayers on the hook for losses, but no plan has gained enough traction to be implemented.

The government rescued Fannie Mae and Freddie Mac during the housing crisis in 2008 with a combined $187 billion taxpayer bailout.

In an interview, Mayopoulos said he believed investors in the company's mortgage bonds won't be spooked by the need for taxpayer money.

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