The housing bust won another quarterly profit/loss bout this week as Fannie Mae reported a loss of $2.2 billion, or $2.57 per share, for the first quarter of 2008.

Despite that (large) negative number, however, Fannie's financials did improve last quarter; the government-chartered mortgage finance firm lost $3.6 billion in 2007's final quarter, so the size of the loss did shrink.

In terms of revenue, Fannie's net revenues grew 36 percent year-over-year, to $3.8 billion for the quarter. The company also inched up its market share of new single-family mortgage-related securities, to 50.1 percent. Its single-family book of business totaled $2.7 trillion, a 3 percent gain compared to the previous quarter.

As might be expected, the single-family market gave Fannie trouble in the first quarter, particularly in states such as where home prices are falling or economic troubles are brewing. The company's earning statement points to Michigan, which was responsible for 22.9 percent of Fannie's single-family credit losses during the quarter, but only represented 3.1 percent of Fannie's "book of business." Other problematic states were California, Florida, and Ohio.

Unfortunately for builders and homeowners alike, Fannie executives don't expect home price declines to end soon. Based on first-quarter data, Fannie now forecasts home prices will sink between 7 percent and 9 percent nationally during 2008.

Falling prices have also corresponded with rising foreclosures, a trend that Fannie hopes to stem through a new initiative called "Keys to Recovery." It includes:

  • a refinancing program for homeowners who are current on their mortgage but underwater on their home loan;

  • a renewal of a $10 billion first-time buyer financing program involving Fannie and state housing finance agencies; and

  • a rent-to-own program for foreclosed properties in selected communities.

"As the market correction continues, we will continue to play both offense and defense," Daniel Mudd, Fannie's CEO and president, said in a statement. "Defense means building and conserving our capital, helping homeowners succeed, controlling our credit losses, and maintaining adequate reserves for further credit losses as the correction plays out. Offense means using our capital to help the market through this period and pursuing extraordinary opportunities to purchase and guarantee high-quality, well-priced mortgage assets."
Alison Rice is senior editor, online, at BUILDER magazine.