Fannie Mae in October warned it would write down "substantially all" of its deferred tax assets, which had become a controversial addition to capital as losses mounted.
Deferred tax assets can be used to offset future taxes, but only if the company can show it will return to profitability.
Credit expenses soared to $9.2 billion in the quarter due to deteriorating mortgage credit conditions and as home prices declined, the company said in a statement.
Fannie Mae's loss equaled $13 per share, compared with a loss of $1.4 billion, or $1.56 per share a year earlier.
The company said it expects a significant loss for the fourth quarter if downward trends in U.S. housing and financial markets continue.
Further losses for the company this quarter mean the government may have to inject billions of dollars of capital to help the company maintain routine operations.
The government pledged to keep a positive level of shareholders equity.
Stockholders equity fell to $9.3 billion in the third quarter from $44 billion at the end of 2007.
The figure may be negative by Dec. 31, the company said.
Fannie Mae and rival Freddie Mac own or guarantee nearly half of all U.S. residential mortgages.
Equity investors, while nearly wiped out under the conservatorship, have been eager to see if the regulator will instruct the companies to sacrifice profit for bigger volumes in their mortgage guarantee and investment businesses.
Both have been given the room to expand portfolios by a combined $200 billion through 2009, but they have been slow to follow through as their funding costs have risen.