Fannie Mae and Freddie Mac Request $13.8 Billion
The Federal Housing Finance Agency (FHFA) approved $12.79 million in bonus pay for 10 executives at Fannie Mae and Freddie Mac. These bonuses come along at the same time as the financial losses continue at these Governments controlled entities.
The US Federal government rescued Fannie Mae and sibling company Freddie Mac in September 2008 to cover their losses on soured mortgage loans. Since then, a federal regulator has controlled their financial decisions. Taxpayers have spent about $169 billion to rescue Fannie and Freddie, the most expensive bailout of the 2008 financial crisis. The government estimates that figure could reach up $220 billion to support the companies through 2014 after subtracting dividend payments.
Mortgage giant Fannie Mae is asking the federal government for $7.8 billion in aid to covers its losses in the July-September quarter. The government-controlled company said Tuesday that it lost $7.6 billion in the third quarter. Low mortgage rates reduced profits and declining home prices caused more defaults on loans it had guaranteed.
Freddie Mac said Thursday that it recorded a net loss of $4.4 billion for the quarter ended September 30, 2011, compared to a net loss of $2.1 billion over the previous three-month period and $2.5 billion for the third quarter of 2010. The nation’s second largest mortgage company is asking the U.S. Treasury for another $6 billion in capital support after posting its largest quarterly loss in over a year. Freddie’s $4.4 billion loss in the third quarter combined with the $1.6 billion dividend payment it made to Treasury for past bailout money left the GSE with a $6 billion net worth deficit as of the end of September. To eliminate this deficit, the Federal Housing Finance Agency (FHFA), as conservator, is submitting a draw request to Treasury for the same amount. The company’s Q3 draw is the largest quarterly request since the first quarter of 2010, and brings the cumulative amount of Freddie Mac’s taxpayer-supported bailout to $72.2 billion. The GSE has returned $14.9 billion to Treasury in the form of cash dividends.
Fannie and Freddie buy home loans from banks and other lenders, package them with bonds with a guarantee against default and sell them to investors around the world. The companies nearly folded three years ago because of big losses on risky mortgages they purchased. Fannie Mae and Freddie Mac own or guarantee about half of all mortgages in the U.S., or nearly 31 million home loans.
Clearly the housing market continues to struggle and all indications are still negative for a housing recovery.