Fannie Mae loss widens to $29bn

Fannie Mae has a key role in the US housing sector

US mortgage finance firm Fannie Mae has reported a significant increase in third-quarter losses in the wake of the slowing housing sector.

Losses hit $28.99bn (£18.3bn) in the three months to 30 September from a loss of $1.4bn a year earlier, largely due to a tax-related charge of $21.4bn.

Fannie Mae and Freddie Mac were bailed out by the US government in a record US corporate rescue deal in September.

Both firms buy mortgages from approved lenders then sell them to investors.

Neither Freddie Mac nor Mannie Mae lend directly to borrowers.

Fannie Mae said it had set a further $9.2bn aside to cover credit losses, as the number of defaults rise.

The Washington-based firm said it expected house prices to continue falling in 2008 in its upper range of estimates between 7% and 9%.

Together Fannie Mae and Freddie Mac own or guarantee almost half of all US home loans.

Under a rescue plan passed by Congress in July, the US government gained the right to provide unlimited liquidity to the two companies and to buy their shares, to prevent them from collapsing.