Fannie Mae, Freddie Mac Foreclosures Results In Taxpayer Money

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Swamping the nation’s largest mortgage buyer today are the Fannie Mae foreclosures. An $ 11.5 billion loss with Fannie Mae was reported in the first quarter of 2010. Fannie Mae has been freefalling. Freddie Mac, Fannie Mae’s little brother, lost more than $ 6.7 billion. Monday, Fannie Mae asked for an infusion of $ 8.4 billion from the U.S. Treasury. Together, Fannie and Freddie say they need about $ 20 billion to stay afloat.

Fannie Mae and Freddie Mac are the only game in town

By threatening to quit giving money to Fannie and Freddie, politicians on both sides of the congressional aisle are eager to score point. The problem is that the only loan company in town, since the market for mortgage securities froze up in 2008, is Fannie and Freddie. 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 Mae and Freddie Mac – 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. The Senate failed to pass a provision on Fannie Mae and Freddie Mac Tuesday night, as reported by Politico. 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. Democrats are in favor of a newly created consumer protection agency to regulate the loans. Republicans, on the other hand, dished out the big government card, saying that the consumer protection agency would have too much power.

Fannie and Freddie takes a dive

Fannie Mae and Freddie Mac behaved like any other bank during the housing bubble. The so-selfish two collected $ 3.9 trillion from investors who purchased bundles of mortgages they assembled. Fannie Mae stock soared to some extent. Once they got in too deep, however, investors lost confidence in Fannie Mae and Freddie Mac, which are public traded companies. Fannie and Freddie threatened to cave in deep, bringing the nation’s housing market down with them. In 2008, the federal government was forced to take over Fannie and Freddie to avert catastrophe.

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. Meanwhile, Fannie Mae reported a quarterly loss of $ 11.53 billion, or $ 2.29 per diluted share of Fannie Mae stock, according to Medill Chicago. This is good news, considering those losses were $ 23.2 billion and $ 4.09 a share the year before. Analysts had estimated a loss of $ 1.75 per share. The Monday report marks the 11th consecutive quarterly loss.

Fannie Mae’s shares traded at about $ 1.05 on Tuesday. Share prices two years ago sat at about $ 26.30. And, for much of the last decade, shares fluctuated between $ 65 and $ 80. The stock closed down 0.94 percent at $ 1.05 on Tuesday.

The problem with Fannie and Freddie

Fannie and Freddie are losing money because they possess or guarantee more than 50 percent of mortgages in the United States. As reported by the New York Times, the details on the losses at Freddie Mac paint a chilling picture of the housing market. Freddie Mac foreclosures at the end of March 2009 were at 29,145 properties. That number rose to 54,000 units in 2010. Freddie’s nonperforming assets almost doubled, rising to $ 115 billion from $ 62 billion. When they sell, Freddie Mac foreclosures lose around 39 percent on a normal basis.

Freddie Mac’s problems with delinquencies

Freddie Mac is also plagued by delinquencies, according to the New York Times. Up from 2.41 percent for the period a year earlier, mortgage payments more than 90 days late in Freddie’s single-family conventional loan portfolio are at 4.13 percent. One step up from subprime loans, delinquencies in Freddie’s Alt-A book 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. Freddie was created for the same reason in 1970. 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. Fannie Mae and Freddie Mac exist to support the mortgage market by purchasing loans from banks and other lenders. They must work, at the same time, to minimize credit losses so the billion that taxpayers have thrown at them don’t dry out.

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