Freddie Needs Up to $35 Billion More From U.S.

[Auburn85 438]

http://www.bloomberg.com/apps/news?pid=206...&refer=home

By Dawn Kopecki and Jody Shenn

Jan. 23 (Bloomberg) -- Freddie Mac, the mortgage-finance company under federal control, said it will ask the U.S. Treasury Department for as much as $35 billion more in aid.

Freddie, which took $13.8 billion from Treasury in November, said in a securities filing today that its fourth- quarter operating losses will again drive its net worth below zero. The McLean, Virginia-based company also said it settled a dispute over Washington Mutual loans with JPMorgan Chase & Co.

The request comes as Freddie and Fannie Mae, the other government-sponsored enterprise, cope with the fallout from a slumping housing market that’s spurred a jump in delinquencies. Treasury officials have pledged as much as $100 billion to each to ensure solvency. The companies need aid if the value of their assets drops below the amount they owe on obligations.

“Their losses are going to be much higher than anyone anticipated,” said Paul Miller, an analyst with FBR Capital Markets in Arlington, Virginia. “The more and more that people are digging into these portfolios, they’re finding out the more and more these guys were doing subprime and Alt-A loans and classifying them as prime.”

Alt-A loans were made to borrowers with little or no income verification or to those with credit scores slightly above subprime.

Washington-based Fannie, which hasn’t yet drawn on the Treasury backup funds yet, said in November that it may have to do so after reporting results for the fourth quarter of 2008. Fannie also said at that time that $100 billion may not be enough to keep it afloat.

‘Drop in the Bucket’

“Given that they have $4.5 trillion of risk out there, $100 billion is a drop in the bucket,” Miller said. “Given the fact that their risk profile on these loans is greater than they led everyone to believe, greater than $100 billion in losses on each institution would not surprise me.”

Stefanie Mullin, a Federal Housing Finance Agency spokeswoman, declined to comment. Brian Faith, a Fannie spokesman, also declined to comment.

FHFA Director James Lockhart, who regulates the companies, said in an interview yesterday that one or both companies may request federal aid after they report fourth-quarter earnings next month.

“They will be reporting numbers in mid-to-late February and, yes, I think everybody would expect that there would be a draw on Treasury,” Lockhart said.

The settlement with JPMorgan, which took over WaMu’s assets after the thrift collapsed in September, will allow the New York-based bank to retain WaMu’s mortgage-servicing contracts, according to the filing.

‘One-Time’ Payment

In exchange, JPMorgan will assume WaMu’s obligations to repurchase any bad home loans that the thrift sold to Freddie with “recourse.” JPMorgan will make a “one-time” payment to cover other loans that WaMu would have been required to buy back because the mortgages failed to meet promises made to Freddie about their quality, according to the filing.

The filing didn’t specify how much JPMorgan is paying Freddie.

Sharon McHale, a Freddie spokeswoman, declined to offer more information about the terms of the JPMorgan deal. Thomas Kelly, a JPMorgan spokesman, declined to comment.

To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.

[Auburn85 438]

but nobody saw this fannie mae freddie mac coming. it snuck up on us little little cat feet. hate is such a strong word, but i absolutely have no respect for Nancy Pelosi.

[Auburn85 438]

and barney franks should be given the title for our new hero for his heroic leadership in this freddie mae fannie mac mess. franks title is Chairman of Financial Services Committee

now, after all the rates reset and the subprime mortgage crap exploded....

from july 11

http://www.youtube.com/watch?v=Q6Yv7jT0TX0

[OldNewby 27]

Freddie needs to get their billions from Barney, Nancy, Harry, Chris and the other crooks in DC. Take up a collection from their supporters.

[Auburn85 438]

http://www.youtube.com/watch?v=kNqQx7sjoS8

this is bush pushing for more home loans to lower income and minorities.

http://thomas.loc.gov/cgi-bin/bdquery/z?d1...mp;summ2=m&

i believe this is the bill that became law regarding this.

it passed with unanimous consent in the house and senate. then, signed into law on November 24, 2003 by Bush. obviously, republicans were the majority in both the house and the senate.

a couple of republicans co-sponsored the Federal Housing Enterprise Regulatory Reform Act of 2005. it was doomed to fail from the get go because in 2004, hearings about freddie mae and freddie mac didn't go to well.

then, when things went sour, people wanted to come out and play the role of the hero and act as if it snuck up on us like little cat feet. now, there's a great chance of having a nationalized bank.

it's just amazing how chris dodd, barney franks, and the gang are immune to this.

[Tigermike 4,251]

Jan. 23 (Bloomberg) -- Freddie Mac, the mortgage-finance company under federal control, said it will ask the U.S. Treasury Department for as much as $35 billion more in aid.

Freddie, which took $13.8 billion from Treasury in November, said in a securities filing today that its fourth- quarter operating losses will again drive its net worth below zero. The McLean, Virginia-based company also said it settled a dispute over Washington Mutual loans with JPMorgan Chase & Co.

Just shut them down. Let the chips fall where they may.

[Auburn85 438]

http://money.cnn.com/2009/01/23/news/econo...sion=2009012319

New Fannie, Freddie rules on the way

Regulator will issue new rules governing the mortgage finance company's portfolio holdings. Also coming, new capital requirements for Federal Home Loan Banks.

NEW YORK (CNNMoney.com) -- The federal regulator of Fannie Mae and Freddie Mac will set new rules early next week governing the mortgage finance companies' portfolios, which play a crucial role in the nation's housing market.

The Federal Housing Finance Agency is required by Congress to issue regulations ensuring the companies' portfolios are backed by sufficient capital, while keeping in mind their ability to provide funding for the mortgage market by turning home loans into securities. Their portfolios contain mortgages and securities backed by home loans.

The agency will also establish new capital rules for the 12 regional Federal Home Loan Banks, which provide much-needed low-cost funding for more than 8,000 banks nationwide. The home-loan banks have suffered in the economic crisis and may have to reduce their lending to shore up their finances.

"The regulations will address items critical to the safety and soundness of the 14 government-sponsored enterprises, which play a vital role in the nation's mortgage market," said James Lockhart, the agency's director.

Analysts, however, say it's more important to determine the future of Fannie and Freddie, which were taken over by the federal government in September, than to issue portfolio regulations.

"What Congress decides to do with these two companies is the real question," said Jonathan Koppell, associate professor at the Yale School of Management.

Portfolio problems

Fannie and Freddie are the largest sources of funding for the U.S. housing market. They buy mortgages from lenders and either hold them on their books or bundle them into securities. The companies also buy mortgage-backed securities.

Their $1.7 trillion portfolios have long been a source of controversy. Regulators had capped the growth of the companies' portfolios after the pair emerged from accounting scandals earlier this decade in an effort to minimize their riskiness.

But as the mortgage crisis unfolded over the past two years, the federal government has leaned more heavily on Fannie and Freddie to keep the housing market afloat. With investors shying away from buying mortgage-backed securities, the two companies are essentially the only players in the arena nowadays. Regulators lifted the portfolio caps last March.

Fannie and Freddie, however, continue to suffer as delinquencies rise. On Friday, Freddie announced it would ask the U.S. Treasury for up to $35 billion more in assistance as it anticipates losses in its fourth-quarter results. The company has already drawn down $13.8 billion of the $100 billion in federal funds made available to it when it was placed into conservatorship in September.

Trouble at FHLB

Meanwhile, the agency must also set capital requirements at the Federal Home Loan Banks, which are owned by the 8,000 member banks but have an implicit government guarantee. Established during the Great Depression, the home-loan banks are the nation's largest source of residential mortgage and community development credit. They provide low-cost loans, called advances, to member institutions, taking collateral such as high-quality mortgage-backed securities in exchange. Banks nationwide have increasingly relied on the home-loan banks for crucial funding as other sources dry up.

But as the value of the mortgage-backed securities drops, the home-loan banks are facing a credit crunch of their own. Some have cut back their dividends. Others have announced they may fall below their current capital requirements.

If the Federal Housing Finance Agency ups the home-loan banks' capital rules, they may not be able to lend as much. But that may not be a bad thing, experts said.

"The problem of the last five years is that people were doing too much lending," said Thomas Stanton, a lecturer at Johns Hopkins University. "They cannot be as big as everyone would like."