Worst Case Scenario Optimism Guesses Fannie and Freddie Could Cost $363 Billion

Oh it's so cute when they spit out optimistic numbers that have no basis in reality, isn't it?

Via the LA Times

The taxpayer bailouts of housing finance giants Fannie Mae and Freddie Mac could cost as much as $363 billion through 2013, according to government projections released Thursday.

The Federal Housing Finance Agency, which has regulated the former government-sponsored enterprises since they were seized during the financial crisis in 2008, said the figure was based on the worst of three scenarios for the economy and housing market that assumes a "deeper second recession."

Under the best-case scenario, which would be a "stronger near-term recovery" in housing prices, the bailouts of Fannie and Freddie would reach $221 billion. The third scenario, in which housing prices continue on their current projections, would result in the combined bailouts reaching $238 billion.

Now while I may disagree with the auto bailouts, small business bailouts, bank bailouts and any other number of bailouts I have to point out here that the loan sharks at the Treasury have at least recouped some kind of return off of those bad business moves. But Fannie and Freddie? An endless black hole.

It takes a village to raise a country after it's been razed to the ground by poor practices and irresponsible behavior and the only way that can happen is if the entire market is subsidized. With Fannie and Freddie on the front and Bernanke on the back the mortgage market is safely propped up indefinitely, no? It's a genius plan!

Dow Jones:

Federal Housing Administration Commissioner David Stevens Tuesday said the Obama administration would ratchet up pressure on mortgage lenders to write down principal for borrowers who owe more than their home is worth.

"In my view we need to push hard on the industry. Servicers and investors have got to begin writing down principal," Stevens said at an event organized by Women in Housing and Finance.

The FHA last month started offering some "underwater" non-FHA borrowers who are current on their existing mortgage opportunity to qualify for a new FHA- insured mortgage. But for borrowers to qualify for the short refinance option, lenders have to agree to write off at least 10% of the unpaid principal balance of the first mortgage.

"We are concerned in the administration that this is probably the next critical element in getting the housing market stabilized--this issue around negative equity," Stevens said.

If we do not get off this train RIGHT NOW the banks better be prepared to write all this garbage down. Trust me, it's handled differently when it is all a liability of the government. You didn't think they had a better plan, did you?

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


OldSouth said...

Ugly, very ugly, and all we seem to have before us is a range of ugly choices.

Thanks for staying on top of it all of for us.

BTW, Godspeed on your move and travels. You-da'-best, young lady.

Anonymous said...

All I have is a $500 billion FRN. I'll take the change IN GOLD.

chairmanben said...

Upcoming election results in a paralyzed congress. Meaning the Dems get more stimulus. The Repubs get more tax cuts. Result more kicking the Fannie / Freddy can down the road.

Eventually China has recession and ctrl-alt-del on the dollar.

Then the pressures on whoever is the White house to clean up this sorry mess.

Defense spending cuts, you betcha.