Fannie Mae Spanked by $2.2 Billion Loss

Fannie Mae FNM posted a huge first-quarter loss on Tuesday that caught Wall Street off guard, and the government-sponsored home finance giant painted a grim picture of the U.S. housing market.

The company said it will raise $6 billion in fresh capital, a move federal regulators have demanded, and slashed its quarterly dividend payments by 29% to preserve cash. It also reported that its loan-loss provision soared to $5.2 billion from $249 million, as CEO Daniel Mudd said he doesn't expect a real recovery in the U.S. housing market before 2010.

The largest buyer of U.S. home loans reported a loss for the quarter of $2.19 billion, or $2.57 a share, compared with the earnings of $961 million, or 85 cents a share, it recorded for the same period last year. Revenue climbed 28% to $3.78 billion.

The bottom-line results missed expectations on Wall Street by a long shot, with analysts expecting a loss of 81 cents a share, according to consensus estimates reported by Thomson Reuters. Top-line results, however, beat expectations, with analysts, on average, forecasting revenue of $1.26 billion for the quarter.

Cramer: Fannie Packs a Value Punch

Fannie is suffering at the hands of a nasty downturn in the U.S. housing market, where prices are recording their largest declines on record since the Great Depression. The mortgage crisis has led to a rash of defaults on home loans in markets around the country, which has in turn provoked a credit crisis on Wall Street and a loss of confidence among investors. Investment banks like Citigroup C, Merrill Lynch MER and Lehman Brothers LEH have posted billions in losses on investments tied to the mortgage market.