We hear plenty of news about the real estate crises, about the rise and fall of the dollar, about unemployment and the Gulf oil spill but at the center of the country’s financial woes are those Government Sponsored Enterprises, also known as GSE’s. Recently, Congress approved the long-awaited financial rehabilitation program but there was no mention of Fannie Mae or Freddie Mac. We watch hours of sickening, guarded testimony about the financial crises but the GSE’s never come up for discussion.
The truth is that nobody knows what to do with these albatrosses. Ever since the Bush Administration pushed for Fannie and Freddie to come under the government’s wing, an already bad situation got worse. In reality, the GSE’s are in such bad shape, nobody has figured out what to do with them.
The probability is that someone or something is going to make a lot of money on the very sick portfolios of Fannie and Freddie. The good news is that Freddie Mac reported their seriously delinquent loans in June fell below the 4 percent threshold for the first time in three years.
Freddie Mac’s mortgage summary indicated that single family loans at least three months past due or in foreclosure was 3.06 percent at the close of June business. In May, the figure was 4.06 percent compared to 4.20 percent in February.
Freddie Mac’s multi-family seriously delinquent rate fell to 0.28 percent compared to 0.32 percent in May. Freddie Mac’s total mortgage portfolio decreased to an annualized rate of 0.9 percent in June. The new balance is a whopping $2.22 trillion.
Mortgages that are in the Home Affordable Mortgage Program (HAMP) are carried as delinquent loans until they actually convert to a permanently modified loan. Once the loan graduates from temporary status, it is considered current with Freddie Mac.
Freddie Mac has already repurchased $73 billion in seriously past due mortgages. The agency has also hardened its stance on homeowners who strategically default on their mortgages.