Fannie reports $29B loss in 3Q as defaults rise

WASHINGTON -

Government-controlled mortgage finance company Fannie Mae said Monday it lost $29 billion in the third quarter as it took a massive tax-related charge and saw mortgage defaults continue to rise.

The company, seized by federal regulators more than two months ago, warned that it if it has another dismal quarter, it may need some of the $100 billion in federal support that the government promised when it seized Fannie Mae (nyse: FNM - news - people ) and sibling company Freddie Mac (nyse: FRE - news - people ) in September.

Washington-based Fannie Mae posted a loss of $13 per share for the July-September quarter, mainly due to a $21.4 billion non-cash charge to reduce the value of a tax asset and $9.2 billion in expenses resulting from falling home prices and surging defaults.

That compares to a loss of $1.4 billion, or $1.56 a share, in the year-ago period.

Analysts surveyed by Thomson Reuters expected a loss of $1.60 per share.

Fannie Mae and Freddie Mac, which own or guarantee nearly half of U.S. home loans, operate in a conservatorship that enables the government to inject up to $100 billion in each company in exchange for ownership stakes of almost 80 percent. They also are facing a federal grand jury investigation into their accounting practices.

Fannie Mae said last month that it would change its accounting for its deferred-tax asset, which can emerge from operating losses, and can be used to reduce future tax expenses. Companies must be able to show they will be profitable if they intend to use the tax asset for earnings in later periods.