Fannie Mae , the biggest source of money for U.S. home loans, said on Wednesday it would seek $4.6 billion in additional federal aid after reporting a fourth-quarter loss.

Earlier on Wednesday, the government-controlled mortgage finance company posted a loss of $2.4 billion for the quarter ended December 31. That pushed Fannie Mae's loss for 2011 to $16.9 billion from $14.0 billion a year earlier, the company said.

Fannie Mae's pre-2009 book of soured loans and declining home prices continue to make it difficult for the company to turn a profit.

We think that we have reserved for and recognized substantially all of the credit losses associated with the legacy book, Chief Financial Officer Susan McFarland said in an interview.

The government seized Fannie Mae and Freddie Mac, which together back roughly half of all outstanding U.S. mortgages, in September 2008 as losses from failing home loans threatened the agencies' solvency.

Fannie Mae has borrowed more than $116 billion from the government and paid almost $20 billion in the form of dividends.

We're very focused on returning to profitability so we don't have to draw (from Treasury) to cover operating losses, said McFarland, who is also an executive vice president.

FIGHT WITH BANK OF AMERICA

Fannie Mae warned it might be forced to request additional aid due to a mortgage-repurchase disagreement with Bank of America Corp. over soured mortgages that failed to meet its underwriting standards.

Last week, Bank of America said it had stopped selling some mortgages to Fannie Mae because of a dispute over requests from the government-run company to buy back defective loans.

If Fannie Mae collects less than the amount it expects from Bank of America, Fannie Mae may be required to seek additional funds from Treasury, the company said in a press release issued on Wednesday.

Fannie Mae and Freddie Mac, the government-sponsored enterprises, don't lend to consumers. Rather, they buy and insure mortgages from banks to let lenders make more loans.

Fannie Mae's credit-related expenses were $5.5 billion in the fourth quarter, compared with $4.3 billion a year earlier and $4.9 billion in the third quarter.

In the fourth quarter, Fannie Mae's provision for credit losses and foreclosed-property expenses rose to $4.7 billion from $4.5 billion in the third quarter. Its provision for loan losses narrowed to $18.7 billion from $23.6 billion a year ago.

Freddie Mac, which hasn't yet reported fourth-quarter results, has received more than $71 billion in government aid. It had paid back about $15 billion as of the third quarter.

(Reporting by Margaret Chadbourn; Editing by Jan Paschal)

Fannie mae