Despite the last few years being dismal, troubled home loan backers Freddie Mac and Fannie Mae are slowly making headway toward being solvent again. More than $130 billion in loans from the Treasury has been pumped to the mortgage houses since they were placed in conservatorship in 2008. However, a brand new round of foreclosures is on the horizon, and that might undo any progress that has been made.
Staying in business is the goal of Fannie and Freddie
Freddie Mac and Fannie Mae were one of the largest recipients of emergency loans during the federal bailouts of the past several years. Both home loan houses received a combined sum in excess of $130 billion to keep the real estate industry afloat. Right now, less money is being lost by the two corporations. ABC states that this can be a good sign. The last quarter of 2010 states showed that Freddie Mac and Fannie Mae didn't lost too much. Only $1.3 billion from Fannie and $1.7 billion from Freddie was recorded. A $16.3 billion loss from Fannie and $7.8 billion loss from Freddie was reported in this same time of 2009. Fannie has asked for $2.6 billion and Freddie has asked for $500 million in loans, even with these losses decreasing.
Stopping the mortgage titans from ruling
For decades, Fannie Mae and Freddie Mac have played a crucial role in the real estate industry. To be able to get capital freed for loan providers to lend more mortgages, the corporations will purchase mortgages and resell them as investments. Fannie and Freddie's involvement in the home loan industry is frowned upon in the government right now where ways to get them out of it are being looked into. Treasury Secretary Timothy Geithner has admonished Congress to have a significant plan ready before attempting to vote on anything, according to USA Today. The housing finance industry might get destabilized while the real estate sector may have other troubles from these programs getting cut, Geithner warned. Geithner thinks a gradual program should be used. This is if a program is used at all.
Freddie and Fannie expected to get worse
In the coming months, more damage is anticipated to be hitting Fannie and Freddie. Until "robo-signing" cases are solved, several foreclosures cannot be completed while about 50 percent of mortgages in the U.S. are owned by Fannie and Freddie while 90 percent were created in the last few years. In the next few years, Treasury Secretary Geithner thinks that housing prices will go up in the next few years, no matter what occurs with Fannie and Freddie, Reuters states. Housing conditions in the last few years have caused home to recommend that buyers put down more cash. This will create stability.
Articles cited
ABC News
abcnews.go.com/Business/wireStory?id=12995329&page=1
USA Today
usatoday.com/money/economy/housing/2011-03-01-fannie-freddie-geithner_N.htm
Reuters
reuters.com/article/2011/03/01/us-usa-housing-geithner-idUSTRE72000P20110301?pageNumber=1
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