Freddie Mac

February 11, 2011 by staff 

Freddie Mac, (CNN) – When the dust settles, the federal bailout of Fannie Mae and Freddie Mac will the government bailout the most expensive of the financial crisis – it already stands at $ 153 000 000 000 and counting.

Even if the Obama administration unveiled its plan to reform the business, experts agree taxpayer losses will continue to climb, no matter what Congress eventually decides to do with them.

The Federal Housing Finance Agency, the government agency that oversees the two mortgage giants, said losses through 2013 will cost taxpayers another 68 billion and the $ 210 000 000 000 above the money already -used to support businesses and the housing market.

“Whatever they do, even if their status were to change tomorrow, none of this will change the losses that will be coming because of their existing book of business,” said Guy Cecala, publisher of Inside Mortgage Finance, an industry trade publication.

The two companies have already made many improvements in underwriting standards over the past two years, making most new loans they fund and to ensure more profitable and less risky, Cecala said.

“But as new business goes only so far, because it is still dwarfed loans five to 10 years,” he said.

(AP) – The Obama administration is preparing to release long-awaited proposals to reduce government support the mortgage market, but Congress will choose the path of financial reform faltering housing finance giants Fannie Mae and Freddie Mac.

The Treasury Department must publish a report Friday that sets out three options to unwind Fannie and Freddie and the transition to a more privatized mortgage market, according to a number of people familiar with the approach of the administration.

The 20 – to 25-page report will not approve an option – a decision by the administration to provoke a discussion on the role of government in housing finance without moving the housing market or lock President Barack Obama to a particular solution.

Introducing the fashionable choice Goldilocks, the scenarios of the report are:

“Not the role of government, except for existing organizations, such as the Federal Housing Administration.

-A role of the state that explicitly guarantees mortgages only when the market is struggling.

-A government’s role at any time, but not through the government supported entities such as Fannie and Freddie.

“Under one scenario that there will need to be more private capital into the housing system,” said Michael Barr, who recently left his post as deputy treasury secretary to return to teach University of Michigan Law School. “This will further pressure on interest rates.”

The greater the government involvement, the sweetest of the impact on borrowing costs. But more government involvement also gives more money from taxpayers at risk.

Complete withdrawal by the government would probably end the popular 30-year mortgage rate fixed or at least make it more expensive. Banks prefer variable rate mortgages that fluctuate with the markets.

Republicans complained that the administration is not behind one of the most consequential and politically explosive issues for the financial system.

“It is disappointing that the administration is abdicating the opportunity to lead and opting instead to release the ball,” said Kurt Bardella, spokesman Darrell Issa, R-Calif., A vocal critic of Fannie and Freddie and Chairman of House committee on oversight and Government Reform. He said that the administration has postponed the release by promising a more accurate this year.

“It’s amazing how the administration is not acting with more urgency to put forward a plan given the taxpayers of billions of dollars at stake,” he said.

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