Fannie Mae & Freddie Mac News

This blog post will be updated from time to time.

2-20-2012:  Freddie Mac issues policy statement to mortgage servicers of Freddie Mac loans that unemployed homeowners (representing about 10% of Freddie Mac's mortgage delinquencies) can have up to 12 months of suspended mortgage payments. Source:  http://www.pe.com/business/business-headlines/20120106-real-estate-freddie-mac-extends-forbearance-for-jobless-borrowers.ece

2-19-2012:  Do you think Fannie, Freddie, or the Federal Housing Finance Agency is more interested in big bank welfare or taxpayer welfare by not getting a better settlement from the major banks?  My big question is:  What kind of due diligence did Fannie and Freddie perform when buying any toxic mortgage loans or securities?  Also, my question is:  Why ask the taxpayers for another effective bailout to drop the loan balances unless they are liens against future sales prices to recapture losses for the taxpayers?
Source:  http://www.huffingtonpost.com/peter-s-goodman/freddie-mac-report-_b_983412.html

3-14-2011:  The SEC is investigating whether Fannie & Freddie had properly & timely reported their exposure to subprime mortgage loans.  Also, Republicans in Congress are drafting proposals to eventually eliminate Fannie & Freddie - Fannie & Freddie have estimated combined portfolio of about $1.5 Trillion and guarantee about $5 Trillion of mortgage loans.

3-11-2011:  According to the Wall Street Journal (3-1-2011,C1) both Fannie Mae and Freddie Mac are borrowing money from the US Treasury to pay their preferred dividends..to the US Treasury...does this make sense?

3-7-2011:  The Securities and Exchange Commission (SEC) issued a Wells Notice to investigate Freddie whether the company violated federal securities laws.

(NOTE to the Insane:  Freddie wants to borrow $500 million from the Treasury to remain solvent after already paying the Treasury Department $1.6 Billion in dividends.  Fannie Mae may require $2.6 Billion to cover cost of dividend payments to the Treasury.  Is this a great country or what? WSJ, 2-25-2011, C7)

3-7-2011:  Interesting - Fannie & Freddie have total portfolio of $1.4 Trillion in home mortgages - They plan to reduce their portfolio by 10% each year. (WSJ, 2-9-2011, A4) (Comment:  I don't think that will happen - Who will buy the loans?  The loans better be good quality, but what is good quality today - may be crap tomorrow.)


2-15-11:  I don't believe Fannie and Freddie were as a large a problem (they were a big part but the private market was worse at times) as the securitization process was to push us into a big slide.  We all saw the writing on the wall that home prices were climbing faster than we could justify the price.  No matter which way we establish the mortgage market in the future, it's gonna take one mean mo-fo regulator to manage to watch every move and warn all involved that there's any problems that need correcting.  So which regulatory body in the US Government has done that good of a job in the past - I say the U.S. Marines, and they can "fire at will" once they contact the enemy!

1-11-2011:  However Fannie and Freddie are structured from ...now on, here's what they're faced with - in the current home price decline, there are 19 million subprime mortgages supported by the Federal Government (i..e., the taxpayer) - (12 million delinquent Fannie Mae/Freddie Mac foreclosures; 5 million FHA insured properties; 2.2 million mortgages held by banks under the Community Reinvestment Act (CRA) requirements.  NOTE:  About 8 million were securitize by various lenders. The Federal Housing Finance Agency (formerly part of the Office of Federal Housing Oversight Committee), the US Government Agency in charge of overseeing Fannie and Freddie, estimates the final cost of bailing Fannie/Freddie out is as high as $363 Billion (right now we're at at least $148 billion).

See the Financial Crisis Inquiry Commission on Cspan for more details.

12-29-2010:  Sounds like the Republicans (who were clamouring to Obama about restructure Fannie and Freddie during the Frank Dodd discussions in more privatization and fast) are now back tracking and saying that we should slow down and lose the Federal grip over time.  The House Financial Services Committee in the next Congressional session (112th Congress) is set to tackle the restructuring - and some suggest gradual lowering over time of limits insured by the Federal Government.

12-26-2010: How should Fannie Mae-Freddie Mac be structured in the future?  The Treasury Department has a January 2011 deadline to propose a revised system to Congress.  Should it be limited guarantees of loans?  No guarantees?  All or nothing?  Both Fannie and Freddie have announced increased risk based fees to lenders in 2011, raising the cost of loans to borrowers.  There maybe lower loan limits limiting exposure to taxpayers

Note:  Fannie and Freddie guarantee about 50% of the $10.6 trillion in home mortgages.
12-26-2010:  The Obama administration is pressuring Fannie and Freddie through their regulatory agency (Federal Housing Finance Agency (FHFA)) to accept a program run by the Federal Housing Authority (FHA) to write down mortgages and hand them to the FHA.  Only 3 loan modification out of 61 applications in the first 6 months.  Some say loan modifications aren't doing enough (no duh!).  Only 10 of 120,000 loans were modified by Fannie and Freddie in the first 6 months of 2010.  Fannie and Freddie are hesitant to reduce loan balances due to limitations of option to recoup losses later.  The FHA program is open to borrowers who "aren't" behind on their mortgage payments.  Also, banks were able to receive subsidies if they wrote down mortgages of borrowers who owed at least 15% more than their homes were worth.  Source: WSJ, 12-8-2010, A2.

Note: An estimated 11 million homeowners (about 23% of all homeowners) are under water (i.e., owe more than their homes are worth).
11-12-2010: An interesting OP-ED piece in the WSJ 11-11-2010 (A19) gave a plan of how Fannie and Freddie could be unleashed on a gradual basis during an 8 year period which may allow the private market to pick up the slack.  It's certainly going to be interesting if Fannie and Freddie ever become privatized or a piece held in US Government control.  I would hope privatization with strong oversight, but you know how that tune could play out - just as bad as it has before under Government control with Government oversight.  We definitely need a good watchdog and a Congress that responds.  And additional transparency wouldn't hurt either.

11-4-2010:  MDJ 11-4-2010, 6B - $4.1 billion loss for 3Q10 and requested an additional $100 million (less than the $1.8 billion last quarter) in federal assistance.

Fannie Mae and Freddie Mac (who owns or guarantees about 50% of all US mortgages) are planning to design an indemnification agreement (perhaps similar to the Bank of America - Fidelity National agreement covering clean foreclosures---but leaves B of A exposed to extra losses).



Fannie and Freddie may end up costing the US taxpayers $259 billion (currently has cost about $150 billion). (WSJ 10-23-2010, B2)...As a comparison, according to Treasury Department $50 billion was shelled out for financial and auto company bailouts.

Fannie May (in August 2010) notified loan servicers they could face fines if foreclosures became unreasonably long. (WSJ 10-230-2010, B2)

Federal Housing Finance Agency (FHFA Chief Edward DeMarco----Joseph A Smith Jr was just appointed per Op-Ed 11-15-2010, A16) is Fannie's and Freddie's regulator is seeking legal assistance in recovering billions in mortgage backed securities that have now foreclosed that were purchased from banks and financial institutions. (WSJ, 10-21-2010, C1)

Fannie & Freddie purchased privately issued securities (about $227) billion as investments backed by subprime and other riky loans in 2006 and 2007.

9-17-2010:  Fannie/Freddie taken over 191,000 homes as of 6-30-2010 and till taking them in faster than selling them; Fannie took a $13 Billion charge for carrying costs in 2Q10;  lenders are taking too long to reclaim homes shadow inventory around 4 million homes; Fannie & Freddie are trying not to dump as many homes on market at one time to lower values in a neighborhood; Fannie plans to test foreclosure rentals in Chicago; Fannie offers HomePath mortgages at 3% down payment - no PMI on their own foreclosed properties.

8-7-2010:  Rep.Spencer Bachus (R) has asked Rep Barney Frank for a hearing into the firing of Caroline Herron (former Fannie Mae Executive) ...Apparently, (according to the 8-7-10 AJC), she was fired after she criticized how the company was running a loan assistance program....She asked that the borrower provide proof of income and these requests were ignored....

Yeah, let's see if (a) Rep Frank holds a hearing and (b) if the real truth is told...I think I know the answer to both concerns...

8-6-2010:  Fannie Mae and and Freddie Mac tighten lending standards since 2008 and lo and behold, since then those loans are performing better than any loan in the past decade...well, duh!

8-6-2010:  So far, Fannie Mae & Freddie Mac have required $146 billion of taxpayer resources to cover losses ... so far.

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