Fannie Mae released it’s annual and 4th Q numbers after the close on Friday and during one hell of a messy snowstorm. FNM posted a loss of $16.3b for the quarter and $74.4b for the year. An unmitigated disaster. The timing of the release suggests that they were hoping that no one would notice how bad the last twelve months were. There was nothing particularly new in the most recent quarter, just more bad news. What is happening at Fannie is also happening at Freddie Mac and to a different extent at FHA. There are some trends that I think are worth noting.
It would be a gross overstatement to suggest that Fannie has found religion and is now committed to making ‘good’ loans versus ‘bad’ ones. In my opinion they still must tighten their lending standards if they expect to stabilize their credit losses. But they have moved to restrict lending to better borrowers. The process is ongoing, but the direction is becoming clear.
At this point all three of the D.C. mortgage lenders are pulling on the credit reins. It is obvious from the report the direction that has been taken. Significant additional measures have been announced by the Agencies that will kick in between now and June.
For those economists out there that are scratching their heads as to why they missed by a mile on their expectations of New and Existing home sales last month they need only look at this report for an explanation. It is harder to get a mortgage today than it was a year ago, It will be harder to get a mortgage in one month from today and even harder to get one six moths from today. For me the implications of this are very obvious. Broad RE values will have to go lower, high-end homes will suffer the most in percentage drops.
Some Thoughts on Fannie's Horrible Year
