Fannie Mae foreclosures are swamping the nation’s largest mortgage buyer. In the first quarter of 2010, Fannie Mae reported an $ 11.5 billion loss. Fannie Mae stock has been in freefall. Freddie Mac, Fannie Mae’s little brother, lost more than $ 6.7 billion. Monday, Fannie Mae asked the U.S. Treasury for an infusion of $ 8.4 billion. Together, Fannie and Freddie say they need about $ 20 billion to stay afloat.
Fannie Mae and Freddie Mac: 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 Fannie and Freddie are often the only loan company in town, since the market for mortgage securities froze up in 2008. 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
Politicians have been avoiding action on Fannie Mae and Freddie Mac, even though the Senate passed an amendment Wednesday placing stricter rules on writing loans. Politico reports that the Senate failed to pass a provision on Fannie Mae and Freddie Mac Tuesday night. Republicans and Democrats can’t agree about language dealing with loans and who should be responsible for overseeing regulations. Democrats are in favor of a newly created consumer protection agency to regulate the loans. On the other hand, Republicans are calling towards the big government card, claiming 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. For awhile, Fannie Mae stock soared. Fannie Mae and Freddie Mac are publicly traded companies, but investors lost confidence once they got in too deep. Fannie and Freddy threatened to collapse–bring down the nation’s housing market with them. To avert catastrophe, the federal government was forced to take over Fannie and Freddie in 2008.
Fannie Mae stock
To date, the U.S. Treasury has thrown more than $ 145 billion into the Fannie/Freddie rabbit hole. 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 foresaw an estimated loss of $ 1.75 per share. Monday’s report marked the 11th consecutive quarterly loss.
Fannie Mae’s shares on Tuesday were traded at about $ 1.05. 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 on Tuesday closed down 0.94 percent at $ 1.05.
Fannie and Freddie’s problem crisis
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. Freddie Mac foreclosures at the end of March 2009 were at 29,145 properties. That number rose to 54,000 units in 2010. Rising from $ 62 billion to $ 115 billion, Freddie’s nonperforming assets nearly doubled. When they sell, Freddie Mac foreclosures lose about 39 percent on average.
Freddie Mac deals with delinquencies
Freddie Mac is also plagued by delinquencies, according to the New York Times. Mortgage payments more than 90 days late in Freddie’s single-family conventional loan portfolio are 4.13 percent, up from 2.41 percent for the period a year earlier. Delinquencies in Freddie’s Alt-A book, one step up from subprime loans, totaled 12.84 percent. Interest-only mortgage delinquencies were 18.5 percent. Delinquencies on rate loans (option-adjustable) totaled 19.8 percent.
Fannie and Freddie’s infinite losses
To make sure that enough funds were available to mortgage lenders, Fannie Mae was created during The Great Depression, and then re-chartered by Congress in 1968 as a publicly traded company. Freddie was created for the same reason in 1970. Today, both Fannie and Freddie 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. At the same time, they must work to minimize credit losses so the billions that taxpayers have thrown at them don’t vaporize.
