Fannie, Freddie May Draw $363 Billion, FHFA Says

By Lorraine Woellert

Fannie Mae and Freddie Mac, the mortgage-finance companies operating under U.S. conservatorship, could draw a total of $363 billion in Treasury Department aid through 2013 if the housing market worsens, the Federal Housing Finance Agency said. The FHFA, which oversees the government-sponsored entities, offered the estimate today as the worst-case in an analysis modeled on the stress tests conducted on the nation’s biggest banks last year. The actual total cost to taxpayers under the regulator’s most dire scenario would be $259 billion, because almost 30 percent of the funds would come back to Treasury as dividend payments on its holdings of senior preferred stock. Under the best-case scenario, which assumes a strong near- term recovery in the housing market, the total cost to taxpayers would be $221 billion, or $142 billion after dividends. A middle-ground scenario would require total aid of $238 billion, or $154 billion after dividends. So far the companies have drawn $148 billion and returned $13 billion in dividends to Treasury. The FHFA analysis, which relies heavily on housing-price projections, presents an incomplete picture of the risks facing Fannie Mae and Freddie Mac, said Karen Shaw Petrou, managing director at Federal Financial Analytics, a Washington-based research firm. “The report provides a sense of the GSEs’ likely cost to taxpayers, but nowhere near a definitive picture of it,” Petrou said in an analysis of the report.

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