Freddie Mac has asked the government to bail it out again with an additional $6 billion in aid, so that it can offset third quarter losses. The request is the largest of its kind since April 2010.
Altogether, the taxpayer has had to stump up almost $169 billion to rescue Freddie Mac and Fannie Mae, since the government decided in 2008 that it would assume control of the two enterprise’s financial decisions, reports Yahoo News.
The latest aid request stems from the fact that Freddie Mac simply aren’t receiving as much money as they need to balance their books. With homeowners refinancing their mortgages at lower rates, Freddie Mac is consequently receiving less cash from them, even if homeowners are saving some cash. In addition, numerous homeowners continue to default on their mortgages, while struggling mortgage insurance firms are unable to stump up as much money to cover these defaulted payments.
Another problem is high inventory of REOs on Freddie Mac’s books. It failed to sell as many of these properties in the third quarter as it did earlier in the year, yet it continued to repossess thousands of homes.
HousingWire reported that the problem is so bad it could take Freddie Mac around 15 years to clear its inventory of REOs:
“If the current trend holds, and the GSE reduces a net 1,000 REO from its inventory every quarter, it would take 60 quarters to unload its entire inventory.”
Together with Fannie Mae, Freddie Mac guarantee or own around half of the mortgages in the U.S. Government estimates predict that the two institutions will require another $51 billion in aid to cover losses up until 2014.
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