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Fannie-Freddie Bailout Costs Could Exceed $350 Billion

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The regulator of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. projects that taxpayers could end up spending more than $350 billion in the bailout of the two companies.

So far, Fannie Mae and Freddie Mac have tapped the U.S. Department of the Treasury for $148 billion in capital, according to a report Thursday from the Federal Housing Finance Agency. The Treasury’s investments are made under preferred stock purchase agreements with the two government-controlled enterprises.

Under three potential scenarios, FHFA has estimated that draws under the stock purchase agreements could reach between $221 billion and $363 billion by 2013. Excluding dividend draws, the total ranges from $142 billion to $259 billion.

The range of infusion estimates reflect scenarios where the housing market is stronger than it is now, a situation where the real estate market remains static, and one where home prices deteriorate.

The regulator said the projections were similar to those taken by federal banking agencies last year in the supervisory capital assessment program.

“These projections are intended to give policymakers and the public useful snapshots of potential outcomes for the taxpayer support of Fannie Mae and Freddie Mac,” FHFA Acting Director Edward J. DeMarco said in the report. “These are not predictions; the results reflect the potential effects of a limited set of hypothetical changes in house prices, a key variable driving credit losses for the enterprises.”

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