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GSE to Raise $6B Despite Q1 Loss

WASHINGTON, DC-Fannie Mae is planning to raise $6 billion in new capital in the wake of rising credit losses for the agency.

By Erika Morphy | Updated on May 06, 2008

WASHINGTON, DC-Fannie Mae’s earnings report delivered a mixed bag for developers and brokers that rely on the government agency for multifamily finance. For the third consecutive quarter, Fannie Mae reported a loss — $2.2 billion for Q1, compared to $961 million for Q1 2007. Furthermore, more bad news will be coming, CEO Daniel Mudd warned in a conference call. Credit losses will be larger next year than this year, he said. In Q1, credit costs reached $3.2 billion; in Q4 2007 they were $3 billion.

It is worrisome news for companies that rely on the GSEs – both Fannie Mae and Freddie Mac – to support multifamily sales. Right now the two agencies are just about the only source of capital for multifamily finance, Tim Sabet, a research analyst with Coldwell Banker Commercial Ideal Realty Group, tells GlobeSt.com.

“Fannie helps us tremendously — they will support value add properties which is what we primarily do.” Freddie Mac, by contrast, tends to support new or trophy-class assets. The two together, he concludes, “are filling a huge void in the market. We just hope they don’t go under.”

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