Many US officials and analysts believe falling prices and rising inventories still threaten the US housing market.
(Polaris/File 2007)
A $400b bailout and counting
Talks could boost Fannie, Freddie
Many US officials and analysts believe falling prices and rising inventories still threaten the US housing market.
(Polaris/File 2007)
WASHINGTON - Fannie Mae and Freddie Mac’s federal regulator is renegotiating the companies’ financing plan with the Treasury Department and could seek an increase to their $400 billion federal lifeline before the end of the year, according to people familiar with the talks.
Treasury and Federal Housing Finance Agency officials are also debating whether to lower the mortgage-finance companies’ dividend payments on their Treasury borrowings, according to these people, who requested they not to be identified describing the internal deliberations.
Fannie Mae and Freddie Mac, the largest sources of mortgage money in the nation, have used $111.6 billion of their $400 billion in backup financing in less than a year. The companies say their 10 percent annual dividend payment, which comes to about $5 billion each, costs more than either have earned in most years and adds to their borrowing from the Treasury.
“A larger line, safest to be executed before year-end, would buy Washington the time necessary to address more pressing housing matters,’’ Jim Vogel, a debt analyst with FTN Financial in Memphis, said in a note to clients yesterday.
Spokesmen for the housing finance agency, Treasury, Freddie Mac, and Fannie Mae declined to comment. Fannie Mae rose 5 cents, or 4.4 percent, to $1.18 in New York Stock Exchange trading. Freddie Mac rose 4 cents, or 2.8 percent, to $1.48.
The financing plan instituted for Fannie Mae and Freddie Mac requires them to reduce their $1.57 trillion combined mortgage portfolios by 10 percent annually, starting next year, and caps their debt issuance at 120 percent of their assets.
The Treasury and Federal Housing Finance Agency seized control of the mortgage-finance companies 16 months ago amid fears they were at risk of failing.
Officials set up a $200 billion lifeline with the Treasury, which was doubled in May, to keep the companies solvent. If they exhaust that backstop, regulators would be required to place them into receivership.
The Treasury Department is facing a Dec. 31 deadline to increase the $400 billion amount without congressional approval.
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