Fannie Mae and Freddie Mac to buy $40 billion a month of bad assets

October 10, 2008 by · 1 Comment
Filed under: Real Estate News 

Looks like they will be using these two GSEs to purchase these bad mortgages to help stem our real estate crisis.  At this point we are so far over the cliff that it really doesn’t matter what they do.  We are headed for a severe contraction in the world economy and the era of easy credit has come to an end for the foreseeable future.

News Piece:

Federal regulators directed Fannie Mae and Freddie Mac to start purchasing $40 billion a month of under-performing mortgage bonds as the Bush administration expands its options to buy troubled financial assets and resuscitate the U.S. economy, according to three people briefed about the plan.

Fannie and Freddie began notifying bond traders last week that each company needs to buy $20 billion a month in mostly subprime, Alt-A and non-performing prime mortgage securities, according to the people, who asked not to be identified because the plans are confidential. The purchases would be separate from the U.S. Treasury’s $700 billion Troubled Asset Relief Program.

The Federal Housing Finance Agency, which placed the two companies in conservatorship on Sept. 7, directed them last month to start increasing their purchases of loans and mortgage-backed securities as the Treasury seeks to absorb underperforming and illiquid assets from financial companies.

“For now, they’re under conservatorship and they have to be used to keep the flow of capital going to the housing market,” former Treasury Secretary Lawrence Summers said in an interview on Bloomberg Television’s “Conversations with Judy Woodruff.” “They’re important to maintaining the flow of government finance” and need to be used actively, he said.

Adding underperforming assets to Fannie and Freddie’s combined $1.52 trillion mortgage portfolios would come at a time when the two mortgage-finance companies already hold as much as $210 billion of bad debt that may be eligible itself for the Treasury’s relief program, their regulator said Oct. 5.

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One Response to “Fannie Mae and Freddie Mac to buy $40 billion a month of bad assets”
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