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.

Fannie Mae has a line of credit with the Treasury Department, and even after taking out $3.7 billion, it would still have $113.9 billion remaining on its credit line.

15 reported a $2.9 billion net loss for its fourth quarter following its own $5.4 billion writedown of deferred tax assets.

Fannie Mae had warned in its third-quarter 10-Q that "if legislation significantly lowering the USA corporate income tax rate is enacted, we expect to incur a significant net loss and net worth deficit".

For 2017, Freddie Mac reported comprehensive income of $5.6 billion, a drop from $7.1 billion in 2016.

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

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

The $3.7 billion Fannie Mae's regulator - the Federal Housing Finance Agency - is asking the Treasury Department for would be the first cash grant given to Fannie Mae in six years. "It is the result of our increased competitiveness and our work to revamp the mortgage experience with lenders we serve with better technology to lower their costs and enable them to provide a better experience to their home buying customers", Layton said. "The guarantee book topped $2 trillion for the first time after growing 6 percent a year ago, the highest rate in a decade".

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

Apart from the tax-cut issue, Fannie Mae's business was relatively stable. In its annual report, Fannie Mae said Watt would continue them "in light of FHFA's determination that this draw is triggered by a one-time charge".

In addition, the amended dividend provisions of the senior preferred stock provide that, if Fannie Mae does not declare and pay a dividend in the full amount provided for in the senior preferred stock for any future dividend period, the capital reserve amount will thereafter be zero.