Despite the last few years being dismal, troubled home loan backers Fannie Mae and Freddie Mac are slowly making headway toward being solvent again. The 2 troubled home loan banking firms were placed under government control in 2008, receiving more $130 billion in loans since that time. The pending foreclosures postponed by legal problems involving foreclosure practices loom on the horizon, which could hamper any progress the 2 firms have made. Source of article – Economic effect of biking vs. driving is astounding, experts say by MoneyBlogNewz.
Staying in business is the goal of Fannie and Freddie
Lots of bailout money went to Freddie Mac and Fannie Mae. They were able to continue business this way. To be able to keep the real estate industry from collapsing, the mortgage houses got $130 billion between the 2 of them. ABC states that the corporations are starting to lose less money currently. During the last quarter of 2010, the period from Oct to December, Fannie Mae posted a loss of only $2.1 billion and Freddie Mac posted a loss of only $1.7 billion. In the very same period of 2009, Fannie posted a $16.3 billion loss and Freddie posted a $7.8 billion loss. Fannie has asked for $2.6 billion and Freddie has asked for $500 million in loans, even with these deficits decreasing.
Plans to wind down the home loan titans
For decades, Fannie Mae and Freddie Mac have played a crucial role in the real estate industry. Mortgages are purchased and then resold as investments through the companies. This means loan companies can lend more mortgages because capital is freed. Fannie and Freddie's involvement in the home loan sector is frowned upon in the government right now where ways to get them out of it are being looked into. Treasury Secretary Timothy Geithner has admonished Congress to have a significant plan ready before trying to vote on anything, according to USA Today. Congress was warned by Geithner that there could be really terrible troubles by cutting out the 2 programs. The housing finance industry may be destabilized completely with this. Geithner has recommended a gradual program as the best course.
Hopefully the worst is almost over
It’s anticipated that Freddie and Fannie will not get much better. They’re expected to get hurt even more soon. Until "robo-signing" cases are solved, several foreclosures cannot be completed while about 50 percent of mortgages in the United States are owned by Freddie and Fannie while 90 percent were created in the last few years. In the next few years, Treasury Secretary Geithner thinks that housing prices will go up in the next few years, no matter what occurs with Freddie and Fannie, Reuters states. He also recommended that given housing conditions over the past few years, home buyers put larger amounts of money down to ensure greater stability.
Citations
ABC News
abcnews.go.com/Business/wireStory?id=12995329&page=1
USA Today
usatoday.com/money/economy/housing/2011-03-01-fannie-freddie-geithner_N.htm
Reuters
reuters.com/article/2011/03/01/us-usa-housing-geithner-idUSTRE72000P20110301?pageNumber=1
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