The government backed mortgage group Fannie Mae posted its biggest loss of $3.6 billion in the fourth quarter of 2007, which amounts to a loss of $2.1 billion for the 2007 fiscal year. Even with its losses the Office of Federal Housing Enterprise Oversight has removed a restriction which now allows Fannie to buy significantly more mortgages.
Fannie Mae is expecting 2008 to be another weak year for housing market with delinquencies, defaults and foreclosures still on the rise. Fannie also raised its 2008 forecast for declining home prices throughout the nation from 4 to 5 percent up to 5 to 7 percent.
Fannie Mae’s losses are proof, if you need more, that the mortgage meltdown that started in the sub-prime mortgage markets has affected other areas in the U.S. economy. Fannie Mae is known for buying solid “A-paper” mortgage loans which makes its losses very disturbing.
Even as the losses mount and with Fannie Mae expect that 8 to 10 out of every 1,000 mortgages they hold to lose money in 2008, the Office of Federal Housing Enterprise Oversight is taking a gamble and lifting restrictions that limit the number of mortgages the government backed company can buy.
By lifting the restriction many believe that the increased activity should help bring down interest rates for homebuyers and encourage lenders to make more loans available.
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