Fannie Mae and Freddie Mac, who have already cost taxpayers $169 billion since the federal government took them over in September 2008, will cost taxpayers a totl of $220 to 311 billion over the next three years.
Actually, that’s good news. In the initial projections released in October 2010, cumulative Treasury draws (including dividends) at the end of 2013 ranged from $221 billion to $363 billion. New projections released today by the Federal Housing Finance Administration (FHFA) estimate Fannie and Freddie will lose slightly less over a year-longer time period.
The projections have been updated to reflect the current outlook for house prices, interest rates, and recent trends in borrower behavior. The difference can be attributed primarily to the fact that actual results for the first year of the projection period in the October 2010 projections were substantially better than projected. Fannie Mae’s cumulative draws on the Treasury are higher than Freddie Mac’s in part because Fannie Mae’s mortgage book of business is approximately fifty percent larger than Freddie Mac’s. In addition, Fannie Mae’s serious delinquency rates are higher than Freddie Mac’s.
The outlook also have improved because borrowers with high mark to market loan to value loans and modified loans are performing better than previously projected. The number of serious delinquent loans has declined as transition rates to later stages of delinquency are lower than previously projected. Foreclosure delays pushed some defaults into later years of the projection period and beyond. Finally, REO sales prices are higher than previously projected.