Fannie Mae and Freddie Mac May Steal Less Than Anticipated

It looks like the bill for the Fannie Mae and Freddie Mac bailouts won’t be as steep as initially thought. The Federal Housing Agency decreased their estimate of the net cost through 2014 from $154 billion to $124 billion — a whopping 19% reduction. The agency said the estimate was sized down because the two mortgage finance companies had better financial results than expected last year and therefore required a smaller capital injection.

Even with the decrease in estimated net cost, the Fannie and Freddie bailout was the most expensive rescue for the Federal Government during the financial crisis. The two companies were placed under conservatorship in September of 2008 to prevent their collapse due mortgage losses from the burst of the real estate bubble.

Tougher lending regulations that were put in place after the mortgage crisis have enabled the Fannie and Freddie to profit from the more recent loans on their books. The FHFA estimates that the companies’ net profits will start paying back the cost of the bailout in 2012 or 2013, however it is not expected that they will ever fully repay their debt. Edward DeMarco, the acting director of the FHFA, said in a speech last month, “It ought to be clear to everyone at this point, given the (firms) losses since being placed into conservatorship..(they) will not be able to earn their way back to a condition that allows them to emerge from conservatorship,” per CNNMoney.

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