Tag Archive | "Fannie Mae"

Fannie Mae and Freddie Mac Continue to Lose Billions

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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Fannie Mae and Freddie Mac Asked to Halt Foreclosures in California

In an unprecedented move, the district attorney of California has filed a notion with Fannie Mae and Freddie Mac that calls for the two mortgage giants to allow for debt reduction on home loans, and ultimately cease the processing of foreclosures in the state of California.

 

She requested that any planned foreclosures be halted until policies regarding for the forbidding of debt reduction for those who owe more than their house is worth be properly addressed. California isn’t the first state to file a request with the two mortgage giants. They have faced constant pressure from around the United States to allow for principal reduction. Massachusetts has also filed a request.

 

The flood of requests has come in following the settlement regarding foreclosure abuse was announced. There has been a great fear that lenders will once again start to process foreclosures at a rapid pace to make up for the previous months during which their hands were tied.

 

Thus far, Fannie Mae and Freddie Mac have denied any possibility of debt forgiveness, citing the potential financial burden it would create for taxpayers.

 

While the most recent foreclosure abuse settlement provided for twelve million dollars in debt forgiveness in California, the ruling did not affect loans backed by Fannie Mae and Freddie Mac. Loans backed by both mortgage giants are not eligible for principal reduction, and thus, are likely candidates for foreclosure.

 

Rather than opt for debt forgiveness, Fannie Mae and Freddie Mac are calling for forbearance on the home loans they back. Forbearance would allow a portion of the debt to be suspended until the house is sold.

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