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Regulator Faults Single-Family Loans in Fannie, Freddie Losses
Fannie Mae and Freddie Mac lost $166 billion on guarantees of single-family mortgages from the end of 2007 through the second quarter of this year, accounting for 73 percent of capital losses in the period, the Federal Housing Finance Agency said.
The government-sponsored enterprises, which have operated under U.S. conservatorship since they were seized in 2008, have used $148 billion in Treasury Department aid to make up that shortfall, the FHFA said in a report released today. Most of the capital reduction was associated with non-traditional and higher-risk loans originated in 2006 and 2007, the FHFA said.
The agency’s first “Conservator’s Report on the Enterprises’ Financial Condition” presents a snapshot of the companies, which are more than 79 percent owned by the U.S. government, aimed at enhancing public understanding, FHFA Acting Director Edward J. DeMarco said in the report. The agency said it plans to release quarterly reports drawing on data from the companies’ regulatory filings and other public information.
Fannie Mae and Freddie Mac, which own or insure half of the U.S. mortgage market, guarantee the health of the loans they pool and sell. When those loan pools go bad, the companies are required to pay investors for losses of principle and interest.
The federal government took control of Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, in September 2008 after losses pushed the companies to the brink of collapse. The Obama administration and Congress are weighing the future of the two companies as part of a planned overhaul of the U.S. housing finance system.
The House Financial Services Committee plans to hold hearings on housing finance starting next month and Treasury Secretary Timothy F. Geithner has promised to deliver a comprehensive overhaul proposal by early next year.
To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net.
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