FHFA Head Warns Fannie Mae, Freddie Mac May Need Another Taxpayer Bailout

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Yesterday, we learned that Fannie Mae recently rolled out a new program known as “Home Ready,” which would allow borrowers to obtain a 3% downpayment mortgage with no minimum cash contribution.


Now we learn this.

From MarketWatch:

WASHINGTON (MarketWatch) — Fannie Mae and Freddie Mac are at risk of needing an injection of Treasury capital after the latter reported its first quarterly loss in four years, the director of the Federal Housing Finance Agency said Tuesday.


FHFA Director Mel Watt issued a statement following mortgage-finance company Freddie Mac’s $475 million third-quarter loss, its first quarterly loss in four years.


“Volatility in interest rates coupled with a capital buffer that will decline to zero in 2018 under the terms of the senior preferred stock purchase agreements with Treasury will likely make both Enterprises increasingly susceptible to the possibility of quarterly losses that could result in draws going forward,” Watt said.


Freddie Mac said its loss was driven by interest rate changes that soured the value of derivatives it holds.

You really can’t make this stuff up.

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So now The GSEs may need another capital injection from The Treasury (or in other words, you, The US Taxpayer) in order that the least creditworthy can buy unaffordable homes at maximum (infinite) leverage... because it's fair.