It may have been created and chartered by the federal government, but Fannie Mae (the Federal National Mortgage Association) is first and foremost a private company responsible to shareholders for running at a profit. And as with many corporations in this country, the national economy is kicking Fannie around…fast and hard!

One of the nation’s two Government Sponsored Enterprises (GSEs), Fannie reported a first quarter net loss of $2.2 billion — attributable at least in part to an increased number of foreclosures. Although an improvement over the $3.6 billion loss reported for Q4 2007, it pales in comparison to the $961 million profit the GSE reported for the same quarter a year ago.

CNNMoney reported last Tuesday that Fannie’s CEO Daniel Mudd is optimistic overall about the company’s future, but sees more challenges lying ahead for the rest of 2008 and possibly beyond.

“As the initial shock of home price declines dissipate and markets settle down from volatility of the last nine months, we’re seeing tremendous opportunity. As the market recovers, we will be a prime beneficiary,” Mudd said during a conference call with investors Tuesday morning.

As a result of the losses, Fannie is revising its forecast for home price declines from a 5 to 7 percent loss nationally for all of 2008, to a 7 to 9 percent loss for the year, with significant regional differences in the rate of home price declines.

Credit-related expenses for the quarter rose from $3 billion for Q4 2007 to $3.2 billion for Q1 2008 as a result of higher charge-offs, defaults and average loan loss severities, the company release notes.

However, foreclosed property expenses decreased to $170 million for the latest quarter, from $179 million in Q4 2007. Still, Fannie’s largest credit losses were concentrated in the states with the largest home price declines — California, Florida, Michigan and Ohio — four states that have remained among RealtyTrac's top foreclosure states in the nation for more than a year now. And it recognized $1.1 billion in losses for the quarter for mortgage-related securities backed by Alt-A and subprime loans.

In order to buffer it’s balance sheet to ride out the rest of the economic downturn, Fannie also announced that it will lower its stock dividend to $0.25 a share starting in Q3 2008, and plans to raise $6 billion through public stock offerings.

Fannie’s outlook for 2008 anticipates further weakness in the housing market that will lead to more delinquencies, defaults and foreclosures on mortgage loans and slower growth in U.S. residential mortgage debt for the year.

In the end this translates into continued opportunity for patient home buyers and real estate investors to pick up some good deals on real property for at least the remainder of 2008 and potentially into 2009 as well.

The prolonged housing slump is having a measurable effect on the overall economy, and not just on home furnishings and housing supply chains (like Linens N’ Things, which recently filed for bankruptcy protection).

Results of a survey conducted during the fourth quarter of 2007 by The NPD Group, a market research firm servicing the retail sector, revealed a direct correlation between areas hard hit by the housing crisis and a marked decrease in the sale of consumer electronics — like LCD televisions and notebook computers — and related products such as printer ink and paper.

Five of the hardest hit designated market areas (DMAs) were among the top 30 based on population. The five — Sacramento, Tampa, Phoenix, Detroit and Orlando — were also among the nation’s top metropolitan statistical areas (MSAs) ranked by foreclosure rate, according to RealtyTrac, for the quarter studied by The NPD Group.

Sacramento ranked No. 5 on RealtyTrac’s Top 100 metro areas for the first quarter of 2008, reporting a 135 percent year-over-year increase in foreclosure activity and a foreclosure rate of one in every 55 households receiving a foreclosure filing during the period. Detroit was No. 6 despite a 4 percent decline in activity with a rate of one in every 68 households receiving a foreclosure filing. Phoenix was No. 7 with a 294 percent increase in activity on a yearly basis and a rate of one in every 70 households receiving a foreclosure filing during the quarter.

Orland ranked No. 13 with a 249 percent yearly increase in activity and a rate of one in every 81 households receiving a foreclosure filing, followed by No. 21 Tampa, where one in every 110 households received a foreclosure filing and a 127 percent increase in foreclosure activity was reported from the first quarter of 2007.

The point here is simple. People who bit off more than they could swallow in the last upswing of the real estate market now can’t afford to pay their readjusting mortgages, or their credit card debt, or higher prices on gas and food. So as the effects of the mortgage meltdown continue to trickle down further, how can consumers continue to afford the electronic toys and the supplies for them?

The answer is…increasingly…THEY CAN’T!

We’d be interested to hear your comments on how this trickle-down effect is impacting the market where you live and work, and the ability of homeowners to keep their homes.

One day after President Bush pointed the finger at Congress and told the American public to blame lawmakers for all of their recent financial woes, an inkling of actual positive news came out of Washington Wednesday with two announcements from government agencies.

In the first, and the more closely watched of the two, the Federal Reserve took a much anticipated move to lessen the pressure on the nation’s economy by lowering the federal funds rate another 25 basis points to 2 percent (that’s a long way down from the 5.25 percent the Fed started with when it cut the first 50 basis points off in Sept. 2007).

After 17 consecutive upward “adjustments” as they were called under former Chairman Alan Greenspan, the Fed under current Chairman Ben Bernanke has now cut short-term rates seven times in eight months.

General weakness in the economy was citied by the Federal Market Open Committee as the primary reason for this latest cut. More specifically, however, the Fed announcement highlighted a number of factors for its decision such as subdued household and business spending, soft labor markets, stressed out financial markets, tight credit conditions and the continuation of the housing contraction.

The vote was 10-2 in favor of the cut in the federal funds rate. However, in a similar action taken at the same meeting, FOMC members unanimously approved a 25 basis point cut in the Fed’s discount rate down to 2.25 percent.

In the second announcement made earlier in the day, the Commerce Department said that real Gross Domestic Product (GDP) increased at an annual rate of 0.6 percent during the first quarter of 2008, the same rate of increase as tracked for the fourth quarter 2007.

With this second straight quarterly expansion in the U.S. economy — no matter how slight it is — the New York Times is reporting that the current situation does not fit into the classic definition of a recession, which is a "significant decline in economic activity spread acorss the economy, lasting more than a few months." This is a positive sign to many people (except those who believe we’re already in a recession).

On the plus side, personal consumption expenditures for services, private inventory investment, exports of goods and services and federal government spending helped prop up the nation’s economy for the quarter.

Those positives were offset by an upturn in imports, a downswing in personal consumption expenditures for personal goods, and the housing slump (which the Commerce Dept. calls the “real residential fixed investment”), marked by a 26.7 percent decrease in home sales following a 25.2 percent decrease the previous quarter.

Generally speaking, both announcements are signs that something positive is being done to keep the nation’s economy moving forward, although it seems to be at a snail’s pace right now. However, both reports also reveal the devastating impact housing is having on the overall health of the economy.

There is no quick fix for the current weak state of the economy. Consumer spending is down, while the costs of energy and food are surging, resulting in lower consumer confidence for the immediate future anyway.

What potential homebuyers and investors need to recognize from all of this is that hoping to catch the market at or near the bottom before values start appreciating again is most likely not going to happen.

2008 is definitely a good time to jump into the water and find that property that meets your criteria — and at bargain prices too for the time being (however long that is).