Fannie Mae will request an infusion of taxpayer money for thefirst time since 2012 because of an unintended but anticipated sideeffect of the corporate tax cut signed into law in December.

The mortgage-finance company, which reported fourth-quarter andfull-year financial results on Wednesday, said it will need to draw$3.7 billion from the U.S. Treasury in March to keep its net worthfrom going negative.

The deficit was driven by a $6.5 billion loss in the fourthquarter, which came as a result of a drop in the value of assetsFannie can use to offset taxes. The assets became less valuablewhen Congress cut the corporate tax rate, resulting in a $9.9billion hit.

Fannie CEO Timothy J. Mayopoulos said in a statement that thecompany’s underlying business was strong.

The loss and bailout is not so much a black eye for Fannie as itis for Congress and policy makers who for more than nine years havefailed to determine the futures of Fannie and Freddie Mac.

Federal regulators took over the two companies during the 2008financial crisis, eventually injecting them with $187.5 billion inbailout money. Some members of Congress and other policy makershave said the companies should be replaced with a system thatdoesn’t leave taxpayers on the hook for losses, but no plan hasgained enough traction to be implemented.

Capital Buffers

In the meantime, Fannie and Freddie returned to profitability.Since 2008, the companies have paid $278.8 billion to the U.S.Treasury. They currently send nearly all of their profits to thegovernment and aren’t required to pay anything when they havelosses. In December, the Treasury Department and the FederalHousing Finance Agency, which controls the companies, agreed toallow Fannie and Freddie to hold capital buffers of $3 billionapiece.

Fannie and Freddie don’t make loans themselves. They buy themfrom lenders, wrap them into securities and make guarantees to makeinvestors whole if the loans default.

For the full year 2017, Fannie said it earned $2.5 billion,compared with $12.3 billion in 2016. Its net interest income in thefourth quarter, which includes fees to guarantee mortgages, was$5.1 billion compared with $5.8 billion in the year before.

In an interview, Mayopoulos said he believed investors inthe company’s mortgage bonds won’t be spooked by the need fortaxpayer money.

Relatively Stable

“Anybody who’s been paying attention to the situation has beenentirely aware that this draw was likely,” Mayopoulos said.

Apart from the tax-cut issue, Fannie’s business was relativelystable.

The percentage of mortgages that it backs that were at least 90days delinquent increased to 1.24 percent as of Dec. 31, up from1.01 percent on Sept. 30. The company said the increase was aresult of the recent hurricanes.

Fannie said that despite the quarterly loss, FHFA Director MelWatt directed the company and Freddie Mac to continue makingpayments to trust funds they finance for affordable housing. SomeRepublicans have said those payments should stop when Fannie andFreddie draw from taxpayer funds. In its annual report, Fannie saidWatt would continue them “in light of FHFA’s determination thatthis draw is triggered by a one-time charge.”

In letters to Fannie and Freddie Mac this month, Watt wrote hedidn’t consider the tax-cut losses “to relate to any financialinstability” in the companies “either now or in the future.”

Spokeswomen for the Treasury Department didn’t immediatelyrespond to a request for comment.

Freddie Mac is scheduled to report fourth quarter and full-yearearnings on Thursday.

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