Fannie Mae posts $2.1B quarterly loss

Government-controlled mortgage buyer Fannie Mae has posted a narrower loss of $2.1 billion for the October-December quarter of last year, and asked for an additional $2.6 billion in federal aid.

The new request is slightly more than the $2.5 billion it sought in the July-September quarter. The mortgage buyer also reported a $21.7 billion loss for all of 2010.

The government rescued Fannie Mae and sibling company Freddie Mac in September 2008 to cover their losses on soured mortgage loans. It estimates the bailouts will cost taxpayers as much as $259 billion.

Fannie Mae's October-December loss attributable to common stockholders works out to 37 cents a share. It takes into account $2.2 billion in dividend payments to the government. It compares with a loss of $16.3 billion, or $2.87 a share, in the fourth quarter of 2009.

Washington-based Fannie Mae and McLean, Va.-based Freddie Mac own or guarantee about half of all mortgages in the U.S., or nearly 31 million home loans worth more than $5 trillion. Along with other federal agencies, they played some part in almost 90 percent of new mortgages over the past year.

Fannie and Freddie buy home loans from banks and other lenders, package them into bonds with a guarantee against default and sell them to investors around the world.

The government's estimated cost of bailing out the mortgage giants far exceeds the $132.7 billion they have received from taxpayers so far. That would make theirs the costliest bailout of the financial crisis.

The two have been hit by massive losses on risky mortgages purchased from 2005 through 2008. The companies have tightened their lending standards after those loans started to go bad. Default rates on new loans are far lower.

The Obama administration unveiled a plan earlier this month to slowly dissolve the two mortgage giants. The aim is to shrink the government's role in the mortgage system. The proposal would remake decades of federal policy aimed at getting Americans to buy homes and probably would make home loans more expensive.

Exactly how far the government's role in mortgages would be reduced was left to Congress to decide. But all three options the administration presented would create a housing finance system that relies far more on private money.

Treasury Secretary Timothy Geithner will face questions from lawmakers next week at a congressional hearing on the proposal.