Fannie Mae's earnings report is out today and the government sponsored enterprise is down another $5.1 billion. These really should be called loss reports. And since Fannie has to pay a premium for it's access to taxpayer cash to cover it's losses, the GSE has asked for $7.8 billion from Treasury for the third quarter of 2011.
New bailout total:$103.8 billion (3Q2008 through 2Q2011) + $7.8 billion =
Add Freddie Mac's $71.2 billion and the revised total for GSE bailouts:
Fannie, like Freddie, continues to see losses from families stopping their mortgage payments--both on loans it owns and revenue streams it guarantees. But one of the big areas of loss comes from selling homes that it has foreclosed on.
These losses are in many ways inevitable. Some foreclosures may be prevented through increased short-refis or short sales, but there would still be investor losses on these transactions. The updated HARP II may lower a few losses with a handful of underwater borrowers being able refi into mortgages with quicker amortization periods—though HARP could also increase some losses because of prepayments by otherwise stable borrowers just taking advantage of the program.
What is not, inevitable, though, is taxpayer guarantees continuing to prop up the GSEs. If there was no taxpayer money for Fannie Mae, then it would not be able to meet its guarantees or pay its debts. Those who have loaned Fannie money would lose. Those mortgage investors who paid Fannie for a guarantee would lose. But that is what is supposed to happen when you make a bad investment decision. Why should they get bailed out?
The only reason that Fannie continues to get bailout money is because it is viewed as essential to the housing market. But as we noted last week, Fannie Mae and Freddie Mac are contributing to the dragged out problems in the housing market by preventing recovery:
The lower the [conforming loan limits], the faster the housing market will move towards real recovery. Therefore, Congress should not move on re-increasing the conforming loan limits. It would have a negative impact on the housing market—further delaying the bubble deflation, dragging out the foreclosure crisis, and crowding out private investment—and subsequently, the economy as a whole.
Click here for a list of Freddie Mac losses to date.
And here is the updated list of Fannie Mae losses:
- 3Q 2011 — $7.8B
- 2Q 2011 — $5.1B
- 1Q 2011 — $8.5B
- 4Q 2010 — $2.6B
- 3Q 2010 — $2.5B
- 2Q 2010 — $1.5B
- 1Q 2010 — $8.4B
- 4Q 2009 — $15.3B
- 3Q 2009 — $15B
- 2Q 2009 — $10.7B
- 1Q 2009 — $19B
- 4Q 2008 — $15.2B
- 3Q 2008 — $0B