Categorized | Finance and Mortgage

Fannie Mae and Freddie Mac Continue to Lose Billions

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Although the financial sector and lending industry are no longer burdened by the heavy losses that hit due to the housing crash a few year ago, the government-backed Fannie Mae and Freddie Mac are still losing billions of dollars.

 

The losses can be attributed to the fact that both mortgage finance giants have been responsible for taking upon a greater share of the housing market while private lenders backed away. In 2011 alone, Fannie Mae lost nearly seventeen billion dollars.

 

Much of the incurred losses are not from recent transactions, but rather those that took place before 2009, during which the mortgage giant was hit with five and a half billion dollars in credit-related expenses.

 

Fannie Mae has actually generated much of its revenue from business generated since 2009. However, the amount of revenue has not been enough to overcome the massive expenses from prior to 2009. Even with the improving housing market and unemployment rate, it will be very difficult for the mortgage giant to generate enough revenue to outpace the credit expenses it continues to face.

 

Of all the companies that received money from the bailouts, only Freddie Mac and Fannie Mae have yet to go beyond needing assistance from government money. Both organizations have had to request for the Treasury to eliminate their massive multibillion dollar deficits.

 

Many economists feel that both companies will likely continue to struggle with massive losses unless their debts from prior to 2009 are wiped clean. Until that takes place, there are many doubts that the two mortgage giants will be financially productive companies.

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About Drew Wilson

Drew focuses on the Commercial and Mortgage/Finance categories.

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