Fannie Mae, Freddie Mac Foreclosures Cost Tax Payers Billions
Swamping the nation’s largest mortgage buyer today are the Fannie Mae foreclosures. Fannie Mae reported an $ 11.5 billion loss in the first quarter of 2010. Fannie Mae has been freefalling. Fannie Mae’s little brother, Freddie Mac, reported a loss of more than $ 6.7 billion. Fannie Mae asked the U.S. Treasury for an infusion of $ 8.4 billion on Monday. Together, Fannie and Freddie say they need about $ 20 billion to stay afloat.
Fannie and Freddie: the only game in town
Politicians on both sides of the congressional aisle are eager to score points by threatening to quit giving money to Fannie and Freddie. The problem: Fannie Mae and Freddie Mac are the only loan company in town since 2008, when the mortgage securities froze up. No one in Congress has the guts right now to do anything that could further weaken the housing market, particularly because Fannie Mae foreclosures are steadily increasing.
Fannie and Freddie: it’s same old politics
Many politicians are still avoiding action on Fannie Mae and Freddie Mac, despite the fact the Senate has passed an amendment Wednesday placing stricter rules on writing loans. According to Politico, the Senate failed Tuesday night to pass a provision on Fannie Mae and Freddie Mac. Republicans and Democrats are having a difficult time deciding on the language dealing with loans and who should be given the responsibility to oversee regulations. To regulate the loans, Democrats want a newly created consumer protection agency to assign the task to. Republicans whipped out the big government card, saying that the consumer protection agency would have too much power.
Fannie and Freddie dive deep
Fannie Mae and Freddie Mac performed just like any other bank during the housing bubble. The greedy siblings collected $ 3.9 trillion from investors who bought bundles of mortgages they assembled. Fannie Mae stock soared to some extent. Fannie Mae and Freddie Mac are publicly traded companies, but investors lost confidence once they got in too deep. Fannie and Freddie threatened to cave in deep, bringing the nation’s housing market down with them. To avert catastrophe, the federal government was forced to take over Fannie and Freddie in 2008.
News on Fannie Mae stock
Overall, the U.S. Treasury has pitched more than $ 145 billion into the pockets of Fannie Mae and Freddie Mac. According to Medill Chicago, Fannie Mae reported an $ 11.53 billion quarterly loss, or $ 2.29 per diluted share of Fannie Mae stock, which is good news considering that number was at $ 23.2 billion and $ 4.09 a share the year before. Analysts foresaw an estimated loss of $ 1.75 per share. Marking the 11th consecutive quarterly loss is Monday’s report.
Fannie Mae’s shares on Tuesday were traded at about $ 1.05. Share prices two years ago sat at about $ 26.30. Furthermore, for much of the last decade, shares rose and fell between $ 65 and $ 80. On Tuesday, the stock closed down 0.94 percent at $ 1.05.
The problem with Fannie and Freddie
Fannie Mae and Freddie Mac are hemorrhaging money because they own or guarantee more than 50 percent of mortgages in the U.S. According to the New York Times, the details on the losses at Freddie Mac paint a scary picture of the current housing market. At the end of March 2009, Freddie Mac foreclosures rose from 29,145 to almost 54,000 units in 2010. Rising to $ 115 billion from $ 62 billion, Freddie’s nonperforming assets almost doubled. Freddie Mac foreclosures lose about 39 percent on average when they sell.
Freddie Mac’s problems with delinquencies
Freddie Mac is also troubled with delinquencies, as reported by the New York Times. Mortgage payments more than 90 days past due in Freddie’s single-family conventional loan portfolio rose from last year’s 2.41 percent to 4.13 percent. Delinquencies in Freddie’s Alt-A book, one step up from subprime loans, totaled 12.84 percent. Delinquencies on mortgages of interest-only were 18.5 percent. Delinquencies on rate loans (option-adjustable) totaled 19.8 percent.
Fannie and Freddie’s infinite losses
Fannie Mae was created during The Great Depression to make sure that sufficient funds were available to mortgage lenders, then rechartered by Congress in 1968 as a publicly traded company. In 1970, Freddie was created for the same reason. Today, both companies are caught between a rock and a hard place. When the housing market tanked, Fannie and Freddie began losing billions. But the mortgage meltdown also made the nation’s housing market totally dependent on them. By buying loans from banks and other lenders, Fannie and Freddie exist to support the mortgage market. They must work, at the same time, to minimize credit losses so the billion that taxpayers have thrown at them don’t dry out.
Fannie Flagg’s Fried Green Tomatoes Book Trailer
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