Fannie Mae, a leading US financing provider for mortgages, said Wednesday it swung into a loss of 2.1 billion dollars in 2007 amid a deepening housing downturn and warned of "another tough year."
Fannie Mae said the net loss of 2.05 billion dollars, or 2.63 dollars a share, was mainly due to the weakness in the housing market and the disruption in the mortgage and credit markets in the second half of the year.
For the full-year 2006, the government-chartered company earned 4.06 billion dollars, or 3.65 dollars a share.
The company said that the housing and credit problems had affected earnings in a number of ways, including an increase of 2.8 billion dollars in its provision for credit losses, an increase of 5.1 billion dollars in market-based valuation losses and a decrease of 2.2 billion dollars in net interest income for the year.
It said its loss for the second half of the year totaled five billion dollars, reflecting "significant increases in serious delinquency rates and foreclosures, home price declines, widening credit spreads, shifts in interest rates and illiquidity in the capital markets."
"We are working through the toughest housing and mortgage markets in a generation," said Fannie Mae president and chief executive Daniel Mudd.
"Our strategy for moving through another tough year is to protect and conserve our capital base, and control credit losses," he said.
Revenue fell in the 12 months ended December 31 to 10.99 billion dollars from 11.79 billion dollars in 2006. The pre-tax impact on earnings of market-based valuation adjustments was a loss of 7.27 billion dollars for 2007.
Fannie Mae added that the disruption in the housing, mortgage and credit markets is continuing in 2008.
"We expect housing market weakness to continue in 2008, leading to increased delinquencies, defaults and foreclosures on mortgage loans, and slower growth in US residential mortgage debt outstanding," the company said.
It anticipated the fair value of its net assets would decline in 2008 from 35.8 billion dollars as of December 31.
Fannie Mae sharply hiked its 2008 forecasts for nationwide declines in home prices, to between five and seven percent, from a prior four to five percent.
It predicted the total peak-to-tough price decline, measuring the price of homes at the peak of the housing boom that collapsed two years ago to the low hit before the market recovers, at between 13 and 17 percent, from the previously forecast 10 to 12 percent.
Created by Congress, Fannie Mae is a shareholder-owned company with a public mission to expand affordable housing and bring in global capital to serve the US housing market.
It operates in America's secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates.
