Taxpayer Tab on Fannie, Freddie Could Hit $363 Billion: Regulator

Freddie Mac and Fannie MaeThe two mortgage financing giants under U.S. government control – Fannie Mae and Freddie Mac – could require a total of $363 billion in bailout funds by the end of 2013, a 145 percent jump from the current bailout tab.
Fannie and Freddie have already siphoned a total of $148 billion from the U.S. Treasury’s open credit line to cover quarterly shortfalls since the height of the financial crisis and housing market collapse.
The Federal Housing Finance Agency, the regulator over Fannie and Freddie, today issued the worst-case scenario of $363 billion in total bailout money. The best case would be a minimum of $221 billion.
The precise figure depends on “three possible housing price paths,” the FHFA said. The first projects a near-term housing market recovery;, the second a longer-term recovery – but without a double-dip scenario; and the third would anticipate a “deeper second recession,” sending home prices further down or stagnated than other possible outcomes through 2013.
“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. “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 (Fannie and Freddie).”
Fannie and Freddie are the source of heated political debate centered on the overhaul of the mortgage financing system. Obama Administration officials are planning to present Congress with a formal plan to re-structure Fannie and Freddie early next year.
Both entities contributed heavily to the housing market collapse through the acquisition of private securities backed by faltering subprime mortgages and other high-risk debt. The two companies form the primary financing vehicle behind this country’s new home loans. The mortgages of most American are either held or guaranteed by Fannie or Freddie.
The two entites were chartered by Congress, but operated as private, profit-making companies until the fall of 2008, when they become wards of the U.S. government.
See the FHFA’s full report.
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