Fannie Mae & Freddie Mac Own Almost 200,000 Foreclosures

By Kevin Chiu

Giant U.S. mortgage lenders Fannie Mae and Freddie Mac own nearly 200,000 single family homes in their bloated inventories of foreclosed freddie-fannie properties, according to a review of the government sponsored enterprises.

The nation’s largest lenders, which were originally started as a way to purchase mortgages and then re-sell them as securities on Wall Street were seized by the government in 2008. Fannie Mae had 135,700 REO properties in its inventory and Freddie Mac 60,600 single family homes as of June 2011.

The two giant sized lenders were downgraded by Standard and Poor’s after the Obama administration announced plans to sell-off the bloated inventories in sizeable chunks to investors. “The downgrades of Fannie Mae and Freddie Mac reflect their direct reliance on the U.S. government,” said S&P in a statement.

The Federal Housing Finance Agency (FHFA) started by the Obama administration to oversee Freddie and Fannie made the announcement, requesting options for selling homes owned by the lenders, which have been bailed out by tax payers.

“While the enterprises will continue to market individual REO properties for sale, FHFA and the enterprises seek input on possible pooling of REO properties in situations where such pooling combined with private management, may reduce enterprise credit losses and help stabilize neighborhoods and home values,” said FHFA acting director Edward DeMarco.

foreclosed home

The bloated foreclosure inventory of foreclosures presents a major problem for the Obama administration, which ran on a platform of straightening out the housing mess and the financial crisis. Time may be running out for President Barack Obama to handle the crisis as foreclosures increase with a new wave of REOs expected to hit the real estate market later this year after delays related to the robo signing scandal.

Since just 2008 Fannie and Freddie have cost tax payers more than $170 billion in direct bail-outs of the two lenders, and a total of almost $1-trillion in purchases of mortgage backed securities by the Federal Reserve. The moves have generated the largest bail out of any financial entities.

At an early August meeting of the Senate Finance Committee momentum showed signs of slowing to gather legislation to develop a new housing finance system, even as losses mount. Recommendations from Congressional members vary from lowering the loan size of mortgages to increasing down payment minimums.

Changes, however, to Fannie Mae and Freddie Mac are expected to be slow as the government works to wind down there mortgage programs, and may develop a new market to trade mortgage securities.