Fannie Mae, the money-losing mortgage-finance company seized by regulators, said it has $15.8 billion in claims against bankrupt securities firm Lehman Brothers Holdings Inc. that it will at best partially recover.
“Based on Lehman Brothers’ financial condition, we believe we will only receive a portion of these claims,” Washington- based Fannie Mae said in a filing with the Securities and Exchange Commission yesterday. The announcement came as the company posted its ninth-straight quarterly loss, of $18.9 billion, and said it will need $15 billion more in federal aid.
This is the first time Fannie Mae has quantified its exposure to derivatives and trading agreements with New York- based Lehman, an underwriter of mortgage bonds that succumbed to the subprime home-loan crisis Sept. 15, 2008, with what was the biggest bankruptcy filing in history. Fannie Mae’s claims would make it the fifth-largest creditor, according to a list maintained by Epiq Systems, Lehman’s claims’ administrator.
Fannie Mae said in a bankruptcy filing last year that Lehman, once the fourth-largest U.S. investment bank, owed it “very substantial sums.”
Fannie Mae, which was seized by regulators about a week before Lehman’s bankruptcy because of questions about its capital reserves, did record $811 million in losses on the Lehman agreements for the third quarter of 2008. Fannie Mae hasn’t disclosed any losses stemming from the Lehman bankruptcy so far this year, according to securities filings.
Fannie Mae filed two separate claims against Lehman. One was for $8.9 billion stemming from derivatives contracts with a Lehman subsidiary, investments in Lehman’s so-called private- label mortgage bonds and other transactions, the company said yesterday. The second filing is a “contingent” claim for $6.9 billion related to a multifamily housing transaction.
Business Partner
Fannie Mae owns or guarantees more than 20 percent of the $11.9 trillion in U.S. residential debt. It makes money by buying mortgages from banks and by guaranteeing home-loan securities. The company also holds some loans and mortgage bonds in its portfolios as investments.
Lehman was a frequent business partner in servicing home loans and the mortgage bonds Fannie Mae and fellow government- sponsored enterprise Freddie Mac guarantee. Brian Faith, a spokesman for Fannie Mae, declined to comment.
Lehman, which listed $613 billion in debt and $639 billion of assets in its original bankruptcy filing, was once one of the biggest underwriters of mortgage-backed securities.
Federal regulators placed Fannie Mae and Freddie Mac into conservatorship 14 months ago and ousted their directors and chief executive officers amid concern the companies might fail amid the worst housing slump since the Great Depression.
[Source:
Bloomberg]
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