Fannie, Freddie In Trouble

NEW YORKU.S. mortgage market giants may report further downgrades to their forecasts for credit losses in their upcoming second-quarter results, starting next week. (Reuters)

In the market’s view, Fannie Mae and Freddie Mac may not have enough capital to offset losses and maintain their roles as the engines of the U.S. housing market.

Freddie Mac, which in May boosted its forecast for total credit losses in 2008 to 16 basis points or 0.16 percent of their total mortgage book, from 12 basis points, plans to report second-quarter results on Wednesday.

Fannie Mae in May ratcheted up its expectation for its 2008 credit loss ratio to 13 to 17 basis points, at least double its historical range, from a prior estimate of 11 to 15 basis points to 15 basis points. Upward revisions to loss forecasts may reignite scrutiny over whether the companies can contain their losses and meet political pressure to expand their support for the housing market. Fannie Mae and Freddie Mac have said they have enough capital and their regulator, OFHEO, affirmed their statements.

The pressure of credit downgrades for companies follows, and in turn may encourage, falling home prices. Fannie Mae has about $70 billion in subprime and Alt-A securities in its portfolio.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (, he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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