Fannie Mae and Freddie Mac have spent $8.5 billion on foreclosed homes since 2007, the Federal Housing Finance Agency’s auditor said in a report urging the regulator to ensure taxpayer money isn’t being wasted.
The FHFA, which has overseen the government-sponsored enterprises since they were seized during the credit crisis in 2008, must ensure Fannie Mae and Freddie Mac can cope with the surge of so-called real-estate owned properties on their books as a result of defaults on loans they guarantee, the agency’s Office of Inspector General said in the report released today.
“The enterprises have experienced extraordinary increases in their REO inventories and the costs associated with them since the onset of the U.S. housing and financial crises starting in 2007 and 2008,” the FHFA watchdog said in the report. “The enterprises are likely to face elevated REO inventories and costs for years to come.”
Fannie Mae and Freddie Mac owned about 180,000 foreclosed properties at the end of last year, triple the amount they had in 2007, according to the report. That’s a third of the entire U.S. inventory of so-called real-estate owned properties, according to RealtyTrac Inc., the Irvine, California-based provider of foreclosure data.
The two companies sold 353,851 repossessed homes last year, up from 57,748 in 2007, according to the report.
“This report paints a startling picture of the challenges faced by Fannie and Freddie in managing their REO inventory,” FHFA Inspector General Steve Linick said today in an interview. “FHFA-OIG will continue to concentrate our resources on this issue as it plays a critical role in the housing crisis.”
To mitigate the costs of foreclosures, Washington-based Fannie Mae this month began a pilot program auctioning off some of its properties in bulk to investors who promise to convert them into rentals.
Fannie Mae and FHFA may not have the capacity to determine whether those sales make financial sense, the report said. The Office of Inspector General will monitor FHFA’s oversight of the program, the report said.
More than half of U.S. mortgages are owned or guaranteed by Fannie Mae and McLean, Virginia-based Freddie Mac, which have operated under federal conservatorship since they were seized in 2008 amid losses that pushed them to the brink of insolvency. Together, they have drawn almost $190 billion in taxpayer aid.
To contact the reporter on this story: Clea Benson in Washington at email@example.com
To contact the editor responsible for this story: Maura Reynolds at firstname.lastname@example.org