Credit Suisse analysts estimate $321 billion in cumulative losses at Fannie Mae and Freddie Mac, based on a further 10% decline in home prices over the next year. Under that scenario, prices would flatten over the following year and experience a 3% annual appreciation going forward. But in its “stress scenario” Credit Suisse said the government-sponsored enterprises could lose as much as $448 billion, 11% higher than the Federal Housing Finance Agency estimate. Under the “stress scenario,” home prices would fall another 20% over the next two years. Analysts said the GSEs could draw another $122 billion to $249 billion from Treasury through 2013. That’s on top of the $148 billion already drawn and does not include dividend payments, which would add another $70 billion to $90 billion. Future delinquencies on the Fannie and Freddie books could reach between $408 billion in the base scenario analysts laid out and $464 billion in the stressed scenario. Also, analysts estimate that 76% of currently delinquent loans would eventually default with a 45% loss severity rate. Of these defaulting loans, 60% would qualify for a modification, and nearly half of the rest would redefault after the workout. As for mortgage putbacks, a growing concern among bank investors, Credit Suisse analysts suggest Fannie Mae and Freddie Mac could put back 5% of their cumulative delinquent loans to lenders. This translates to about $40 billion in bad mortgages the banks would have to buyback from Fannie and Freddie and reduces the losses to the GSEs by $15 billion to $20 billion. Write to Jon Prior.
Credit Suisse projects $321 billion in losses for Fannie, Freddie
Most Popular Articles
Latest Articles
Did lower mortgage rates slow housing inventory growth?
After two weeks of significant increases, my model for inventory growth with higher mortgage rates came crashing down last week.
-
Labor market report is good news for mortgage rates
-
Virginia Realtors: Zillow’s touring agreement may not be legal
-
Low inventory creates challenging conditions in North Carolina’s housing market
-
Tri-state area housing shortage could cost the region economically
-
Remote reverse mortgage counseling now permanently permitted in Massachusetts