The mortgage giant Fannie Mae posted $2.2 billion in losses Tuesday in its third consecutive quarter of bad news. A reporter from the New York Times explains this latest bad news and its potential impact on the mortgage market.
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Now, new losses at the nation's largest buyer of home loans and growing worries about what that might mean. Margaret Warner has the story.
Today's posting of a $2.2 billion loss by Fannie Mae was the third straight time the mortgage giant has issued bad quarterly news.
Fannie Mae and its sister, Freddie Mac, were originally created by the government to buy, guarantee and sell home loans. They are now publicly traded companies.
To explain today's news and its potential impact on the already-troubled housing market, we turn to Charles Duhigg of the New York Times.
And, Charles, thanks for being with us. This huge quarterly loss again for Fannie Mae, in simple terms, why? Did Fannie Mae underwrite loans that went sour, or is it more than that?
CHARLES DUHIGG, New York Times:
Fannie Mae bought a lot of loans that two or three years ago people thought were going to perform much better than they did. As almost every other bank has experienced, these loans turn out not to be as good a bet as everyone thought they were.
Homeowners are walking away from homes that they had previously purchased. They're not making payments on time. And as a result, loans that Fannie Mae both owns in its own portfolio and that it's guaranteed by selling to other investors and promising to pay if the borrowers don't pay, they're now on the hook for.