Currently, Fannie and Freddie have received $135 billion and have repaid $13 billion to the Treasury.
Fannie and Freddie were battered by losses on loans they backed, once the housing bubble burst and foreclosures soared. The two companies buy home loans from lenders, package them into bonds with a guarantee against default and sell them to investors.
The best case scenario would be if housing prices remained the same for the next two years. If the economy got worse over the upcoming months then Fannie and Freddie won’t be able to recover as much revenue on foreclosures and would need more taxpayer money. The total bailout for the two programs could end up costing taxpayers between $142 billion to $259 billion through 2013. If this were to happen, housing prices could drop another 24% until 2012.
The two mortgage finance companies have been operating under federal control for more than two years. When the government stepped in to take them over in September 2008, their rescue was expected to cost only a combined $200 billion.
Allegations that mortgage lenders nationwide cut corners on foreclosure documents as they moved to seize millions of homes have put Fannie and Freddie under scrutiny. The two companies have used so-called “foreclosure mill” law firms that are accused of processing thousands of files in haste.
However, over the next year lawmakers are planning to review Fannie and Freddie’s success and consider a potential replacement system, which wasn’t originally mentioned in the financial overhaul. The Obama administration has been blasted for relying on Fannie and Freddie to modify home loans, which in turn has run up the cost of the bailout.
If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us.
You can join our Facebook Fan Page – Alabama Consumer Protection Attorneys where we share useful information about the same types of issues that we cover in this blog.