OFHEO: Fannie and Freddie Need Significant Capital

April 15, 2008 No Comments »

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The Office of Federal Housing Enterprise Oversight released its annual report to Congress today, applauding the government sponsored entities’ abilities to put their accounting issues behind them, but warned that better regulation and increased capital were still needed.

Last year, the two mortgage financiers’ market share grew 15 percent to a total of $5 trillion in guaranteed mortgage-backed securities outstanding and mortgage investments, nearly double the eight percent gain in 2006.

Not to mention that their share of total loan originations jumped from 37.4 percent in 2006 to a whopping 75.6 percent by the fourth quarter of 2007.

Of course, it wasn’t a windfall for the two financing giants, as Fannie and Freddie reported combined fourth quarter losses of $6 billion, resulting in annual losses of $5.1 billion.

And despite their huge market share and multi-billion dollar losses, Lockhart noted that the pair are expected to take on an even stronger role this year to prop up the sagging housing market.

He added that Fannie and Freddie remain “a significant supervisory concern” because of the ongoing mortgage crisis where “challenges of 2007 are still present,” and will need to raise “significant additional capital.”

(photo: squeakymarmot)

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