Fannie Mae, Freddie Mac Bailout Costs Could Soar
NPR
By Robert Siegel
The bailout of mortgage giants Fannie Mae and Freddie Mac has already cost taxpayers $135 billion, and that tab is expected to grow. Today, the agency that regulates the firms released projections that show the additional bill over the next three years could hit $90 billion or more.
TAMARA KEITH: Fannie Mae and Freddie Mac are in the housing business. They own mortgages and mortgage-backed securities. They own or guarantee more than $5 trillion worth. That's their only business. And business has been bad, says Richard Green, a professor of real estate at USC.
RICHARD GREEN: You just have a lot of bad mortgages, and that's the fundamental cause of the losses here.
KEITH: Fannie and Freddie used to be independent companies, but the government had to take them over during the financial crises. Now, when they run out of money, they come back to the U.S. Treasury for more.
To get a sense of how much it could cost taxpayers, the firms' regulator, the Federal Housing Finance Agency, put Fannie and Freddie through a stress test. There were three scenarios. One, home prices improve more than expected over the next few years. Two, the recovery slogs along like it has been...
...KEITH: Green says it assumes another dramatic drop in home prices - 20 to 25 percent.
GREEN: And I suppose that could happen, but that is very pessimistic.