The Congressional Budget Office, in a report released Thursday, continues to project that the federal government’s involvement in Fannie Mae (FNM) and Freddie Mac (FRE) will generate losses for taxpayers. The U.S. Treasury Department, seeking to maintain solvency at the two government-chartered mortgage finance companies, is slated to make quarterly capital infusions over the next three years to cover gaps between Fannie and Freddie’s assets and liabilities. In exchange, the institutions will issue to Treasury senior preferred stock, which pays 10% annual dividends. Even though Fannie and Freddie are expected to generate revenue that exceeds their losses and other costs as the housing and mortgage market recovers, “the entities’ current dividend commitments to the Treasury exceed their future earnings capacity, making losses on the Treasury’s current and future holdings of their senior preferred stock likely,” the CBO report said.
Taxpayers Stand To Lose Money On Fannie, Freddie Support – CBO
Most Popular Articles
Latest Articles
Mortgage rates continue to rise before the Fed’s meeting
This week will be eventful as the Federal Open Markets Committee meets on Wednesday and the U.S. jobs report is released Friday