As Losses Mount, Fresh Doubts Raised on Mortgage Agencies

Source: Construction Exec

Date :06/05/2008 07:41:26

With mortgage defaults and foreclosures rising, Bush administration officials, regulators and lawmakers are nervously asking whether Fannie Mae and Freddie Mac – the would-be saviors of the housing market - will soon need saving themselves.

The mortgage giants say fears that they might falter are baseless, having recently received broad new powers and billions of dollars of investing authority from the federal government.

But some financial experts worry that the companies are close to the edge.

Growing losses

Fannie Mae and Freddie Mac, which were created by Congress but are owned by investors, suffered more than $9 billion in mortgage-related losses last year, and analysts expect those losses to grow this year.

Analysts say the companies are sitting on billions of dollars in additional losses that they have not yet fully acknowledged. If either company stumbled, the mortgage business could lose its only lubricant, potentially causing the housing market to plummet and the credit markets to freeze up completely.

It is feared if Fannie or Freddie fail taxpayers would have to bail them out at a staggering cost.

May 6, 2008