Austin Real Estate Blog

The mortgage crisis and housing slump that has taken the US by storm had created serious financial losses for the Fannie Mae Corporation, as well as the Freddie Mac program. These losses are not only detrimental for the companies themselves, but also for those in the market for mortgages, as the costs for using these programs will increase significantly to help make up for the losses.

Reports from the second quarter that were recently released showed an increase in revenue for Fannie Mae, but the expenses incurred swallowed them up, and then some. There was a loss expected by analysts, however the $2.3 billion in losses that was incurred was many times greater than anyone could have anticipated. Freddie Mac’s projected loss was much less than the actual damage, as well.

These programs are in place to buy higher risk mortgages from lenders and resell them to investors, guaranteeing the repayment of the loans. In order to keep the companies operational, the federal government is working on an emergency plan to add billions of dollars in funding to the companies. The funding has been passed, but has not yet been enacted.

As these two institutions are connected with more than half of the open mortgages in the country, keeping them operational is crucial. The companies plan to decrease operating costs over the coming months, hoping that this, combined with the federal help will help them to keep their heads above water.