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Fannie Mae to request $3.7B from Treasury over tax reform loss

Fannie Mae to request $3.7B from Treasury over tax reform loss

The mortgage giant Fannie Mae will need $3.7 billion from the government after losing $6.5 billion in the fourth quarter as a result of the new Republican tax law.

To eliminate the resulting net-worth deficit, the company said it expects the Federal Housing Finance Agency, its regulator, to submit a request to the Treasury for $3.7 billion. Freddie Mac paid $11 billion to the exchequer in 2017.

If Fannie Mae receives the cash infusion, it will mark the first time since 2012 that the government has been forced to pour money into the mortgage association. They buy them from lenders, wrap them into securities and make guarantees to make investors whole if the loans default.

Additionally, Fannie Mae provided more than $67 billion in multifamily and other rental financing in 2017, the company said. The company insisted that its fourth quarter comprehensive income was $2.1 billion without the write-down.

Watt said that although the companies were on much better footing, financially, since the meltdown of 2008, the incremental draw-down of their taxpayer buffer meant there was greater risk of the need for a taxpayer bailout.

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Apart from the tax-cut issue, Fannie's business was relatively stable.

A woman toting an umbrella passes Fannie Mae headquarters in Washington February 21, 2014. The company said the increase was a result of the recent hurricanes.

"The challenge is that additional draws of taxpayer support would reduce the amount of taxpayer backing available to the enterprises under the PSPAs and the foreseeable risk that the uncertainty associated with such draws or from the reduction in committed taxpayer backing could adversely impact the housing finance market", Watt said. In its annual report, Fannie said Watt would continue them "in light of FHFA's determination that this draw is triggered by a one-time charge".

Freddie Mac is scheduled to report fourth quarter and full-year earnings on Thursday.


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