The company on Monday said it could record additional impairments in the fourth quarter, if it is unable to sell or transfer these low income housing tax credits. Fannie Mae said “Because we expect to have a net worth deficit in future periods, the impairment will increase the amount that would be requested from Treasury by FHFA, on our behalf under the senior preferred stock purchase agreement.”

On Thursday, the company reported a quarterly loss of about $19 billion, as we mentioned in a previous post. Fannie Mae said it was awaiting Treasury approval to transfer the credits to unnamed investors.

Fannie Mae said that it will be hard to sell or even transfer the tax credits, which are incentives designed to bring more investment to low-income housing developments. To read more on this story go to reuters.com.

The losses have come from the increased costs of buying bad mortgage backed loans as part of the government’s efforts to support the housing market. Freddie Mac (NYSE:FRE) was also taken under government control last year as well as Fannie Mae. Both companies request takes the amount that the pair has asked for from the US Treasury to more than $100bn.

Fannie Mae and Freddie Mac buy mortgages from approved lenders then sell them to investors. Both these companies make up half of all US mortgages, worth more than $5 trillion. Next year, the US government will unveil its plans for the two mortgage giants.

To read more on this story go to bbc.co.uk. How long can Governments around the world keep bailing out financial institutions? Let us know your thoughts.

The US Treasury have announced a plan to push down the US mortgage rates, the idea behind the plan it for Fannie Mae and Freddie Mac to pay a higher price for loans from lenders, the lenders will be then in a position to offer loans to borrowers for as little as 4.5 percent for a 30 year mortgage loan.

The Treasury will then buy mortgage backed securities with those loans in them, all this sounds like a great idea, however the government will be funding the purchases by selling treasuries. Basically this plan would be like the US Treasury turning into a huge hedge fund or more worryingly like a bank.

To be eligible for the 4.5 mortgage rate you would need to be buying a home not re-financing one, and you would need to qualify for Fannie and Freddie’s conventional loan terms,.

Source:interestrateroundup

The Abyss release

Freddie Mac (NYSE:FRE) and Fannie Mae (NYSE:FNM) along with 12-member Federal Home Loan Bank system (FHLB) controls a whopping $6.8 trillion of US debt, this amounts to more than half of the total US government debt which stands at $10.6 trillion, according to a report by the Federal Housing Finance Agency.

The FHFA now supervises both Fannie Mae and Freddie Mac through a government conservatorship after the two mortgage giants were seized in the summer by the Federal government. It also now watches over the 12 home loan banks.

According to the report the 14 government-sponsored enterprises either guaranteed or purchases almost 87 percent of new mortgages that were made in the second quarter of this year.

Freddie Mac who posted a $25.3 billion loss in the third quarter was the first last week to ask the government for a cash injection of $13.8 billion of government funds, this was the first bank to take advantage of the Treasury’s $200 billion bailout promise.

Source: APGoogle

US mortgage giant Freddie Mac reported losses of $25 billion for the period between July and September this year and have now asked the US Federal government for the first $14 billion handout that was made available from the Feds bailout plan.

It just raises more concerns that the government’s interception was not enough and it will take a lot more money to prop up both Freddie Mac and its sister company Fannie Mae.

With Freddie Mac’s liabilities being more than $13.8 billion it is basically broke and some analysts predict that the government may have to pay up to $200 billion to save the two ailing banks.

The Treasury will have to inject money every quarter into Freddie or Fannie if either company’s liabilities exceed their assets or up to $100 billion for each firm, this comes under the government agreement.

Source: washingtonpost

Yesterday the US government unveiled that Freddie Mac and Fannie Mae would modify the terms for borrowers as long as they are 90 days late with their mortgage repayments, however some Americans are unhappy that it will only help the homeowner that have already run into trouble and not the homeowners who have carefully balanced their money through hard times to make sure the mortgage is paid.

With 90 percent or more of US homeowners currently up-to-date with their payments there will be no help for them, it seems the help is only there if you have been carless with your money and run up huge debts you can’t afford, it does seem unfair that you have to push yourself into worse debt just to get help from the Federal Government.

Citigroup also this week announced they are will also be helping people who fall behind in their mortgage payments in a scheme called “pre-emptive campaign” Citigroup have said they want to reach out to its distressed borrowers in distressed area’s which include, Ohio, Nevada, Michigan, Indiana, Florida, California and Arizona.

The following banks have all modified their mortgage portfolio to help such borrowers, HSBC, JPMorgan Chase, Federal Deposit Insurance Corporation after the IndyMac takeover and Bank of America who took the mortgage portfolio from Countrywide that was full of bad debt.

Source: NY times

Fannie Mae and Freddie Mac are at the centre of a US government plan to stabilize the ailing property market and modify mortgages stopping short of direct federal financial help for homeowners at risk.

Between Fannie Mae and Freddie Mac they back or own around 31 million mortgages that when altogether are work $5 trillion. The US government took over both banks in September due to debts mounting in their mortgage portfolios.

To be eligible for the plan you would need to live in the mortgages property, not filed for bankruptcy, own at least 90 percent of the home’s value and must be at least 90 days late in your mortgage payments.

The government would then adjust the loan onto a lower interest rate that could be lowered for 5 years and then put on to a prearranged level or you could be put on a longer loan agreement which could be to 40 years, with the main goal being to bring the monthly payment less than 38 percent of the monthly household income.

In the third quarter of 2008 Fannie Mae reported a loss of $29 billion, as well as sharp increases in loan defaults.

Source:

Fannie Mae the largest US residential mortgage provider announced losses of $29 billion in the quarter three, this equates to a loss of $13 per share.

For the same period last year Fannie Mae lost £1.4 billion which works out at $1.56 per share, and the mortgage loan company has warned of major loss for the fourth quarter if the US financial and housing crisis continues.

This is the fifth consecutive quarterly loss for the US mortgage giant who was has been running since September under a US government conservatorship.

Due to property price decline and worsening mortgage credit conditions Fannie Mae credit expenses hit the roof to $9.2 billion in the third quarter.

The government may have to bailout Fannie Mae again with another billion dollar injection of capital to keep the company afloat. However the government has assured shareholders that they will keep a positive level of shareholders equity.

Source: USAtoday

When Freddie Mac and Fannie Mae were taken over by the US government not only did the taxpayer inherit bad debt, they could possibly be in-line to pay tens of thousands of dollars in legal fees, these legal fees are for the mortgage executives who are at the centre of the housing market collapse.

As the Justice department investigates the firms that were involved in the financial and mortgage meltdown, defense lawyers are being hired around the country for the mortgage executives, Freddie Mac and Fannie Mac had contracts that guaranteed to cover legal bills for the executives.

As the government bailed out Fannie and Freddie with $200 billion dollars of taxpayers’ money the obligation has now been passed onto the government, resulting in the government possibly having to pay for its own prosecutors and also the lawyers of the defense.

Source: Ap.Google

A public debate was opened last Friday by Federal Reserve Chairman Ben Bernanke over what should happen with Freddie Mac and Fannie Mae once the financial crisis is over.

Last month both Fannie and Freddie were taken over by Uncle Sam after Bernanke said they were operating in “an unsafe and unsound manner”. In a speech Bernanke made via satellite to a conference regarding the meltdown in the mortgage industry he said that a debate over alternative organizational structures for Fannie Mae is worthwhile.

According to Bernanke, both Fannie and Freddie have been allowed to continue to sell the securities even though the market for mortgage-backed securities has declined massively on the wake of the subprime-mortgage crisis.

It is expected that the government would have to issue a guarantee of some sort if public mortgage-securities business is to recover. Then tax-payers involvement will become an issue and will need to be dealt with.

Source: Marketwatch