Fannie and Freddie Masking Billions in Bad Loans
The Federal Housing Finance Agency’s inspector general reported that Fannie Mae and Freddie Mac are covering up billions of dollars in losses due to a substantial number of delinquent loans in their portfolios, Reuters reported Aug. 19. The FHFA demanded that they immediately acknowledge those losses.
The FHFA had required the government-sponsored enterprises to account for the bad loans within two years — a timeframe the inspector general said was unacceptably long. The FHFA said that the two-year window would correspond with its plans to implement new regulations and reporting standards that would result in the charging off of “billions of additional dollars related to loans,” the inspector general’s report noted.
While both GSEs have returned to profitability, they have cost American taxpayers $188 billion in bailout money since being brought under government conservatorship in 2008.
Fannie reported a $10.1 billion profit for the second quarter, and Freddie posted a second quarter net income of $5 billion, Reuters reported.
The FHFA reported that Fannie and Freddie losses on loans that are 180 days or more delinquent are at “reasonable” levels, and the inspector general’s sense of urgency is unwarranted.