Officials Say GSE Bailout Will Cost Less Than Originally Estimated
The Federal Housing Finance Agency (FHFA) has lowered its projection for just how much taxpayer funding is needed to support the nation’s two largest mortgage financiers.
FHFA estimates that Fannie Mae and Freddie Mac will need between $220 billion and $311 billion from the American people when all is said and done. Those figures represent capital assistance from September 2008, when the two mortgage giants were placed into conservatorship, through the end of 2014.
The federal agency has actually trimmed those numbers from estimates released a year ago, primarily because the GSEs have required less funding so far than officials initially thought. Projections released by FHFA in October
FHFA estimates that Fannie Mae and Freddie Mac will need between $220 billion and $311 billion from the American people when all is said and done. Those figures represent capital assistance from September 2008, when the two mortgage giants were placed into conservatorship, through the end of 2014.
The federal agency has actually trimmed those numbers from estimates released a year ago, primarily because the GSEs have required less funding so far than officials initially thought. Projections released by FHFA in October
2010, covering a span one year shorter, ranged from $221 billion to $363 billion through the end of 2013.
Over the last three years, Fannie and Freddie have drawn $169 billion from Treasury under the Senior Preferred Stock Purchase Agreements of their conservatorship. To date, they’ve returned $28 billion in dividend payments.
To assess the GSEs’ capital needs over the next three years, FHFA has devised three what-if scenarios, taking into account expected loan performance, macroeconomic conditions, and home prices.
Based on these hypotheticals, the agency is projecting Fannie and Freddie will need another $51 billion to $142 billion, on top of the $169 billion already received.
FHFA notes that Fannie Mae’s cumulative draws are higher than Freddie Mac’s, in part because Fannie’s mortgage book of business is approximately 50 percent larger and carries a higher serious delinquency rate.
For both companies, provisions for loan losses, plus foreclosed property expenses continue to drive projected Treasury draws across all three future scenarios.
While to date, the GSEs have needed extra money each quarter from Treasury to cover dividend payments owed to Treasury, FHFA’s projections show that as each company’s financial situation improves over the coming years, at least a portion of future dividends will be paid out of comprehensive income.
Over the last three years, Fannie and Freddie have drawn $169 billion from Treasury under the Senior Preferred Stock Purchase Agreements of their conservatorship. To date, they’ve returned $28 billion in dividend payments.
To assess the GSEs’ capital needs over the next three years, FHFA has devised three what-if scenarios, taking into account expected loan performance, macroeconomic conditions, and home prices.
Based on these hypotheticals, the agency is projecting Fannie and Freddie will need another $51 billion to $142 billion, on top of the $169 billion already received.
FHFA notes that Fannie Mae’s cumulative draws are higher than Freddie Mac’s, in part because Fannie’s mortgage book of business is approximately 50 percent larger and carries a higher serious delinquency rate.
For both companies, provisions for loan losses, plus foreclosed property expenses continue to drive projected Treasury draws across all three future scenarios.
While to date, the GSEs have needed extra money each quarter from Treasury to cover dividend payments owed to Treasury, FHFA’s projections show that as each company’s financial situation improves over the coming years, at least a portion of future dividends will be paid out of comprehensive income.
Mac will need between $220 billion and $311 billion from the American people when all is said and done
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