After years of dismal performance, home loan houses Freddie Mac and Fannie Mae finally have some good news attributed to them. The 2 troubled firms are creeping back toward solvency. Both troubled mortgage backing houses were placed under government conservatorship in 2008. Since then, the two firms have been injected with more than $130 billion in loans to keep them afloat. However, dark clouds are on the horizon. The government intentions to possibly get rid of the two government sponsored enterprises and a fresh round of foreclosures is on the horizon.
Fannie and Freddie working back to the top
Lots of bailout money went to Freddie Mac and Fannie Mae. They were able to continue business this way. Both home loan houses received a combined sum of more than $130 billion to keep the real estate industry afloat. However, the 2 toxic companies are starting to hemorrhage less money, according to ABC. During the last quarter of 2010, the period from October to Dec., Fannie Mae posted a loss of only $2.1 billion and Freddie Mac posted a loss of only $1.7 billion. In 2009, during this exact same quarter, the deficits were much heavier. Freddie posted $7.8 billion in losses while Fannie had $16.3 billion in deficits. Fannie has asked for $2.6 billion and Freddie has asked for $500 million in loans, even with these losses decreasing.
Stopping the home loan titans from ruling
For decades, Freddie Mac and Fannie Mae have played a crucial role in the real estate industry. Mortgages are purchased and then resold as investments through the companies. This means lenders can lend more home loans because capital is freed. The government is trying to find ways to get Freddie and Fannie out of the mortgage industry. Just reducing involvement might help a lot. Timothy Geithner is the Treasury Secretary. He has told Congress that, before voting, they had better have a really good plan, USA Today states. Congress was warned by Geithner that there can be really terrible issues by cutting out the two programs. The housing finance industry could be destabilized entirely with this. Geithner thinks a gradual program should be used. This is if a program is used at all.
Hopefully the worst is almost over
It is expected that Fannie and Freddie won't get much better. They are anticipated to get hurt even more soon. Until "robo-signing" cases are solved, several foreclosures cannot be completed while about 50 percent of home loans 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 takes place with Freddie and Fannie, Reuters reports. Housing conditions in the last few years have brought on home to recommend that buyers put down more money. This will create 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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