The Federal Housing Finance Agency projected Thursday that mortgage giants Fannie Mae and Freddie Mac would cost the Treasury Department between $221 billion in a best-case scenario and $363 billion if the economy recedes again through 2013. The FHFA, which has held Fannie and Freddie in conservatorship since 2008, assessed the financial performance of the two government-sponsored enterprises. According to the report, both companies have drawn $148 billion from the Treasury under Preferred Stock Purchase Agreements. Under three different scenarios the FHFA laid out, Fannie and Freddie could draw as much as $363 billion all told. FHFA Acting Director Edward DeMarco said the report is not a prediction but instead “reflect potential effects” of possible changes in house prices. “These projections are intended to give policymakers and the public useful snapshots of potential outcomes for the taxpayer support of Fannie Mae and Freddie Mac,” DeMarco said. The FHFA developed the models based on the same stress tests used by the Federal Reserve and the Federal Deposit Insurance Corp. of the major U.S. banks. House prices changes have been the major driver on the performance of the GSEs. Moody’s Investors Service developed a three different house price paths for the test, which include a near-term recovery, the current baseline and a deeper second recession. If the economy recovers in the near-term and prices have reached a trough in the first quarter of 2009 and have begun to trend upward. Under this best-case scenario, Fannie and Freddie would need $221 billion. At the current baseline, prices will drop from the peak 34% to a bottom in the third quarter of 2011. If this happens, the GSEs would cost $238 billion. But if the housing market slumps into a second dip, and prices fall 45% from the peak to a trough out in the first quarter of 2012, both Fannie and Freddie would cost the taxpayer $363 billion. In each scenario, Fannie Mae usually doubles the amount needed at Freddie Mac. Write to Jon Prior.

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