Tag Archive | "Freddie Mac"

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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Freddie Mac Expects Gradual Recovery to Continue in 2012

According to Freddie Mac’s latest report regarding the expectations for the housing market in 2012, it looks as if the market will continue its gradual recovery. Those that were expecting the market to experience strong growth will likely be disappointed, as Freddie Mac believes that such a performance will not take place for at least another year.

Although strong growth is not expected for 2012, there is much to be happy with regarding the report. Analysts believe that the housing market will be in a better position at the end of this year than where it is right now. There are various positive signs of growth in the housing market, as consumer confidence and employment levels are expected to improve.

Unemployment has hit its lowest level in three years, and more than one and a half million jobs were added in the last year. Those numbers are expected to improve even further in 2012. As consumer confidence continues to grow, spending will likely increase as well. With increased spending, the job market should continue to improve, leading to a strong improvement in home sales.

With fixed mortgage loans hitting a new low in rates in the past week, housing sales should continue to show improvement. Analysts believe that residential property sales will likely increase by around five percent in 2012, and inventory levels should shrink to a six-month supply.

More potential homeowners believe that now is a great time to buy a home than in previous months, and if the market continues to show improvement, it is likely that those potential homeowners will opt to finally make a purchase.

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Freddie Mac May Have Improperly Handled Loan Reviews

Freddie Mac’s lawsuits against many of the nation’s major banks and lenders may have taken a serious hit if the most recent reports regarding their handling of loan reviews are accurate. According to third party independent sources, Freddie Mac may have incorrectly handled the loan reviews during the purchase of millions of dollars of bad loans from the banks.

The firm is currently suing many of the major banks on the basis that they sold the bad loans under the guise that they were legitimate, causing the government take over of Freddie Mac. However, if the current reports are legitimate, it may have been Freddie Mac’s own failure to engage in the proper procedures that led to the purchase of the bad loans that dismantled the firm.

The reports state that Freddie Mac failed to engage in all recommended loan review procedures, and as such, did not do enough to detect problems with the loans that they were buying. The data indicates that the firm failed to review mortgage loans older than two years old under the premise that most defaults occur in those first two years. As such, they bought millions, and possibly even billions of dollars in bad loans.

Spokesmen from Freddie Mac have responded to the report, claiming that any further investigation of the loans at the time would have adversely affected business relationships that they had with the various banks, and was not a realistic possibility at the time. However, the firm reviewed less than ten percent of the bad loans, and it is that negligence that may work against them with respect to their current lawsuits.

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