Fannie Losses May Mean Tougher Mortgage Standards to Come

by Alex Stenback on August 7, 2009

Fannie-Mae is rattling the cup for an additional $10.7 Billion dollars from the US Treasury.  Here’s the press release, and a key excerpt:

“We are experiencing increases in delinquency and default rates for our entire guaranty book of business, including on loans with fewer risk layers…This general deterioration in our guaranty book of business is a result of the stress on a broader segment of borrowers due to the rise in unemployment and the decline in home prices.”

If you’ve been watching this for any length of time, you’ll know that wherever delinquency and default rates rise, tighter mortgage standards are almost sure to follow.

And don’t expect this to be the last cash transfusion - Fannie’s goose is still cooking:

“Total nonperforming loans in our guaranty book of business were $171.0 billion on June 30, 2009,…Due to current trends in the housing and financial markets, we expect to have a net worth deficit in future
periods, and therefore will be required to obtain additional funding from the Treasury.”

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