Fannie Mae, the government-owned mortgage giant, is asking taxpayers for another $7.8 billion to cover the company’s losses from July through September, the Associated Press reports. The company lost $7.6 billion during the third quarter.
Fannie already has received $112.6 billion in taxpayer money, the most expensive bailout of any company to result from the 2007 financial crisis. Another $57 billion has gone to bail out Freddie Mac, Fannie’s sister company. Both companies got into trouble by investing heavily in risky subprime mortgages in 2005 and 2006, right as the housing bubble was reaching its peak, according to the Congressional Financial Crisis Inquiry Commission report.
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Last week, Freddie Mac asked for another $6 billion in government aid.
Fannie’s latest losses are due to the company losing revenue—first because many homeowners are refinancing their loans to take advantage of historically low interest rates, and second because of an increase in the number of people defaulting on their mortgages. Many mortgages are insured by Fannie, so when homeowners default, the company must pay lenders for the loss.
Fannie’s dark cloud does have some silver edges. Even though the number of people falling behind on their mortgages has increased in recent months, as we reported, the number falling behind on their Fannie-backed loans has continued to decline since early 2010.
“Despite these challenges, we are making solid progress,” Williams told the AP.
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