Lead Story
Drawing Up a Fannie Mae/Freddie Mac Blueprint Will Be Complex
By Paul Muolo
Within the next 90 days the White House is expected to release its blueprint on what to do with the nation's money losing — but much needed — Congressionally chartered mortgage giants, Fannie Mae and Freddie Mac. If you think the answer to this dilemma is going to be an easy one then I have some AIG bonds I'd like to sell you.
First, let's state what might not seem so obvious: Fannie and Freddie are really giant savings and loan institutions. They hold liabilities and assets. Instead of using deposits they tap the capital money markets using short- and long-term debt. Most of their assets aren't whole loans, but mortgage-securities backed by residential whole loans.
Together, they have $1.6 trillion of on-balance sheet assets and off-balance sheet guarantees of $3.6 trillion for a total exposure of $5.2 trillion. And even though both operate under federal conservatorships (with Treasury pumping money into them to keep their net worth positions north of zero) Uncle Sam has yet — as a technical matter — to put his "full faith and credit" sticker on them.
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HUD Secretary Shaun Donovan on HUD's staff exercising restraint in taking enforcement actions against Federal Housing Administration-approved lenders during the first 120 days.
