Fannie and Freddie Tab May Rise to $363 Billion

October 21, 2010 No Comments »

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More staggering figures from the Federal Housing Finance Agency, which oversees government mortgage financiers Fannie Mae and Freddie Mac.

The pair, which went into conservatorship back in September 2008, could cost American taxpayers up to $363 billion. Yes, billion.

Less severe scenarios put the numbers somewhere between $221 billion and $238 billion, but if dividend payments on Treasury preferred stock were excluded, the cost would fall to between $142 billion and $259 billion, at worst.

“These projections are intended to give policymakers and the public useful snapshots of potential outcomes for the taxpayer support of Fannie Mae and Freddie Mac,” said FHFA Acting Director Edward J. DeMarco, in a statement.

“These are not predictions; the results reflect the potential effects of a limited set of hypothetical changes in house prices, a key variable driving credit losses for the Enterprises.”

To date, the pair have drawn $148 billion from the U.S. Treasury – these new figures are the projected cumulative Treasury draw through December 31, 2013.

Back when Fannie and Freddie were public companies, they were slammed for taking on unnecessary risk to stay competitive, a strategy that eventually led to their demise.

They dealt in stated income loans, no-doc loans, and other Alt-A loan programs that led to billions in losses.

And Countrywide was reportedly Fannie’s biggest customer, with the mortgage lender accounting for nearly 20 percent of all loans purchased by the mortgage financier in 2008.

Both companies were delisted from the NYSE back in July and began trading on the OTC bulletin board.

Shares of Fannie Mae were up 2.36% to 39 cents, while Freddie Mac was up 1.78% to 40 cents in afternoon trading on Wall Street.

The pair purchase mortgages from banks and lenders on the secondary market, and hold some in their own portfolios while securitizing others.

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