Mumbai: Fannie Mae, the largest home loan provider in the US, reported a $3.55 billion fourth-quarter loss and said it expects a worse slump this year amidst rising foreclosures.

Fannie Mae saw the value of its derivatives contract fall $3.2 billion derivative contracts and a $2.9 billion loss in credit expenses, according to a filing with the Securities and Exchange Commission.

``We are working through the toughest housing and mortgage markets in a generation,'' Fannie Mae CEO Daniel Mudd said in a statement.

Fannie Mae increased its estimates for credit losses and said home prices will decline more than its previous forecast, boosting costs for the $2.3 trillion of mortgages that the company owns or guarantees.

Fannie Mae raised its estimates for credit losses this year to a range of 11 basis points to 15 basis points from a range of 8 basis points to 10 basis points.

The company has lost more than half its market value in the past year as the housing slump deepened.

Fannie Mae and its nearest rival Freddie Mac profit by holding mortgages and mortgage bonds as investments and by charging a fee to guarantee and package loans as securities. Their losses mount with rise in defaults.

The McLean, Virginia-based Freddie Mac, which registered losses of $2.02 billion in the third- quarter and $480 million in the year-earlier fourth quarter, will announce fourth-quarter results tomorrow.
 
Meanwhile, regulators have agreed to remove limits on the $1.5 trillion mortgage portfolios of Fannie Mae and Freddie Mac, bringing an end to a restriction that hobbled their ability to provide financing for the housing market.

The cap, imposed in 2006 after the mortgage finance companies uncovered $11.3 billion of accounting errors, will end on March 1, the Office of Federal Housing Enterprise Oversight said in a statement.