Fannie Mae’s recently published first quarter results offer a resounding refutation of the economic positivity that has been driving the current stock market rally, green shoots, second derivatives and all.

So what pieces of information are probably giving the administrations economic recovery spin-machine the biggest headaches?  How about…

• US home price forecast to decline 7-12% for 2009
• 2009 credit losses predicted to be greater than 2008
• Fannie Mae management does not expect to operate profitably in “the foreseeable future”.
• The company reported a quarterly loss of $23bn, its seventh consecutive quarter in the red.
• Fannie Mae asks the US Treasury for another $19bn in capital

Even more shocking is the revelation that Fannie’s losses are no longer even close to being limited to the subprime mortgages that had previously been identified as problems.  This quote, directly from the report, is via FT Alphaville

Our entire guaranty book of business, including loans with lower risk characteristics, has begun to experience increases in delinquency and default rates as a result of the sharp rise in unemployment, the continued decline in home prices, the prolonged downturn in the economy, and the resulting increase in mark-to-market LTV ratios.

In addition, certain loan types have continued to contribute disproportionately to the increases in serious delinquencies and credit losses we reported for the first quarter of 2009. These include loans on properties in California, Florida, Arizona and Nevada; loans originated in 2006 and 2007; and loans in higher-risk categories such as Alt-A loans and interest-only loans.

The substantial portion of our Alt-A and subprime private-label mortgage-related securities were rated AAA when we purchased these securities; however, many of these securities have suffered significant downgrades since we acquired them.

As indicated in Table 22 above, approximately 54% and 74% of our Alt-A and subprime private-label mortgage-related securities, respectively, were rated below investment grade as of April 28, 2009. Approximately 25% and 13% of our Alt-A and subprime private-label mortgage-related securities, respectively, were rated AAA as of April 28, 2009.

Although our portfolio of Alt-A and subprime private-label mortgage-related securities primarily consists of senior level tranches, we believe we are likely to incur losses on some securities that are currently rated AAA as a result of the significant and continued deterioration in home prices and the increasing delinquency, foreclosure and REO levels, particularly with regard to 2006 to 2007 loan vintages, which were originated in an environment of significant increases in home prices and relaxed underwriting criteria and eligibility standards. These conditions, which have had an adverse effect on the performance of the loans underlying our Alt-A and subprime private-label securities, have contributed to a sharp rise in expected defaults and loss severities and slower voluntary prepayment rates, particularly for the 2006 and 2007 loan vintages.