United States mortgage giants Fannie Mae and Freddie Mac are continuing to absorb additional losses as real estate prices keep dropping nationally, and are in need of further financial assistance from taxpayers says the country’s housing regulator.
Edward DeMarco, the acting director of the Federal Housing Finance Agency, reported to Congress that the two mortgage companies operating under U.S. conservatorship would be unable to survive without any additional aid. The FHFA report acknowledges that Fannie and Freddie will continue to endure losses over the next several years due to mortgages which were originated prior to the U.S. government taking control of the companies in May 2008.
“Fannie Mae and Freddie Mac each remain critical supervisory concerns,” DeMarco wrote to Congress. “Throughout 2009, each company remained active in supporting the secondary mortgage market and, together, the Enterprises’ mortgage purchase and guarantee activity in 2009 represented more than 76 percent of total single-family originations. While critical to supporting the ongoing functioning of the nation’s housing finance system, the Enterprises would be unable to serve the mortage market in the absence of the ongoing financial support provided by the U.S. Department of the Treasury.”
The FHFA report conveyed that Fannie Mae and Freddie Mac both remained critical supervisory concerns in 2009, and that the enterprises continue to play a major role in providing liquidity and stability to the mortgage market, while carrying out foreclosure prevention efforts. The two enterprises own or guarantee half of the loans in the $11 trillion U.S. mortgage market, and have already received $145 billion in Treasury Department funding to this point in time.
Additionally, the FHFA report also outlined that while the Federal Home Loan Bank System met its public purpose during the financial crisis, advances steadily declined to $631 billion at the end of 2009. Also, the 2009 financial performance of half of the 12 FHLBanks was less than adequate due to investments in private-label mortgage-backed securities, and the Seattle FHLBank was deemed “undercapitalized.”
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