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Fannie & Freddie Losses from Bad Mortgages Could Reach $363 Billion

Source: Dow Jones

Posted on 21 Oct 2010

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Losses absorbed from bad mortgages made by Fannie Mae and Freddie Mac could end up costing the government $363 billion according to the companies' regulator.

The Federal Housing Finance Agency ran stress tests under varying scenarios. The best case, with improving housing prices, saw the government-sponsored mortgage operators drawing a cumulative $221 billion in taxpayer money. If house prices drop, the bill would hit $363 billion.

"These are not predictions; the results reflect the potential effects of a limited set of hypothetical changes in house prices, a key variable driving credit losses for the enterprises," said FHFA Acting Director Edward DeMarco.

To date, Fannie and Freddie have drawn $148 billion from the Treasury Department under the Preferred Stock Purchase Agreements program. The government took over the two enterprises in September 2008 as they faced a financial crunch.