Fannie Mae, the largest home loan funds provider in the US, has asked the government for an additional US$8.4 billion or S$11.6 billion of funds after the company lost US$13.1 billion in Q1.
The mortgage fund provider will receive over US$84.6 billion from the government, including its latest request, and the company said it saw no end in sight to federal assistance.
The announcement came after smaller home loan finance firm, Freddie Mac, said it needed US$10.6 billion in federal assistance after it lost US$8 billion in the first quarter.
The US Treasury Department took control over the two firms at the height of the 2008 economic crisis. Currently, the two companies have already tapped more than US$145 billion in assistance from the government’s unlimited credit line.
Rajiv Setia, a housing analyst at Barclays Capital, said Fannie Mae is likely to ask for another $40 billion to $50 billion from the federal government. The plan to put the two lending firms into conservatorship was meant to be temporary, but more than a year later, US Treasury Secretary Timothy Geithner has only just started to figure out how to fix the US housing finance system.
Fannie Mae warned of “significant uncertainty as to our long-term financial sustainability”, as the lending firm expects the weak housing market in the US to keep credit-related costs and default rates high.