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Fannie Mae narrows loss, but asks for more aid

By David Goldman, staff writer

NEW YORK (CNNMoney.com) -- Fannie Mae says that its financial condition has vastly improved over previous quarters, but the mortgage finance company still requested more government assistance.

The government-run company said Thursday it lost $1.2 billion in the second quarter, down significantly from an $11.5 billion loss in the prior quarter. Last quarter's loss was the smallest since the government took Fannie Mae and Freddie Mac into conservatorship in September 2008.

Fannie said it continues to suffer credit losses from home loans issued between 2005 and 2008. Although those losses will continue in the future, the company said it believes it has reserved enough "for the substantial majority of these losses."

That didn't stop Fannie from asking for another $1.5 billion in government aid. The Treasury Department has given the company a total of $85 billion over the past two years. But those loans are expensive, carrying a hefty interest rate that forced Fannie to pay $1.9 billion back to the Treasury last quarter.

The company said the loans it is currently purchasing are subject to much higher underwriting standards than the ones of the past several years, carrying the lowest early "serious" delinquency rates in a decade.

"We are focused on sustainable homeownership, and our higher underwriting and eligibility standards reflect that," said Mike Williams, Fannie Mae's chief executive, in a statement. "Across our industry, we are seeing a more realistic approach to housing and lending that bodes well for the future." To top of page

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