The loss, which is three times more than was expected by Wall Street experts, comes after Freddie Mac, Fannie Mae’s sister firm announced losses of £416m earlier this week.
Freddie Mac and Fannie Mae are Government-sponsored institutions which guarantee around £2.53tn worth of American mortgages.
Fannie Mae says results were wholly driven by an increase in the provision for credit losses.
Fannie Mae president Daniel H. Mudd says: “Based on our experience, we anticipate further increases in our combined loss reserves. This is the most difficult U.S. housing market in more than 70 years.
“Volatility and disruptions in the capital markets became even more pronounced in July. We are taking a series of additional actions that reflect our ongoing focus on conserving and enhancing our capital, as well as managing our credit risk through the balance of this cycle.”
Freddie Mac chairman and chief executive Richard F. Syron echoed Fannie Mae’s bleak forecast for the rest of 2008. He says: “We expect continued housing and economic weakness will affect our overall performance this year.”