What Your Tax Dollars Are Paying For At Fannie Mae And Freddie Mac

The Obama Administration quietly announced around Christmas time that Fannie Mae and Freddie Mac have an unlimited credit line with the federal government.

The graphic from the New York Federal Reserve shows how the portfolio of mortgages owned by Fannie Mae and Freddie Mac were performing at that same time.

Fannie Mae and Freddie Mac own mortgage loans — trash bins full of them.

The map, drawn from a nifty but depressing interactive graphic at the website of the New York Federal Reserve, shows the number of seriously delinquent loans owned by Fannie Mae and Freddie Mac as of the fourth quarter of 2009.

Seriously delinquent as in no payment in over 90 days.

The darker the shading, the higher the percentage of loans classified as seriously delinquent.

Most of those seriously delinquent loans will never get “rehabilitated.” They should be written off: foreclosed or sold short.

But there are two big problems with doing that.

First, it makes Fannie & Freddie into Snidely Whiplash, kicking families from their homes while cackling and twirling his moustache. Bad image for an election year.

Second, Fannie & Freddie are required to keep capital reserves. Writing off loans vaporizes capital reserves. Replenishing capital reserves requires still more taxpayer money — hence that quiet approval of unlimited credit.

Keep that in mind while you’re working on your taxes this year.

Fannie, Freddie’s $125 billion tab still growing (msnbc.msn.com)
Fannie & Freddie Reform Pushed Back One Year (hsh.com)
Recipe for Fixing Fannie and Freddie: More Money, More Loans, More Time (dailyfinance.com)
Treasury restates support for Fannie, Freddie (seattletimes.nwsource.com)
Geithner: No change to Fannie, Freddie until 2011 (seattletimes.nwsource.com)
Christmas Bonuses for Fannie and Freddie (marginalrevolution.com)

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Tags: Fannie & Freddie, fannie mae, financial crisis, financial recovery, freddie mac, Mortgage loan, New York Federal Reserve

This entry was posted on Thursday, March 11th, 2010 at 9:57 am +0000 GMT and is filed under Business, Current Events, Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

3 Responses to “What Your Tax Dollars Are Paying For At Fannie Mae And Freddie Mac”

Kneadle Work: Twitter Updates for 2010-03-11 says:

March 11, 2010 at 7:58 pm +0000 GMT

[...] at Traces: What Your Tax Dollars Are Paying For At Fannie Mae And Freddie Mac http://www.cehwiedel.com/blogs/traces/?p=14426 [...]
Prosthetic Device: Twitter Updates for 2010-03-12 says:

March 12, 2010 at 4:22 am +0000 GMT

[...] at Traces: What Your Tax Dollars Are Paying For At Fannie Mae And Freddie Mac http://www.cehwiedel.com/blogs/traces/?p=14426 [...]
The Treasury took over Fannie Mae and Freddie Mac « Salt Lake City Mortgage – Salt Lake City, Utah says:

June 7, 2010 at 9:53 pm +0000 GMT

[...] What Your Tax Dollars Are Paying For At Fannie Mae And Freddie Mac (cehwiedel.com) [...]

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