While Foreclosures Remain High, Fannie Mae Asks for Federal Credit
The US economy is still reeling under the effects of Recession. Unemployment is at its peak. As people lose jobs even those with excellent credit scores are faltering on mortgage payments. Hence, foreclosures are high.
Fannie Mae, which is controlled by the government, has asked for an aid of $2.5 billion. It has posted a loss in this quarter, although the margins are lower. The lender said that it has already lost $3.46 billion. It had to pay $2.1 billion dividend. This payment was made to the Treasury. It may be pointed out here that the government had rescued both Fannie Mae and Freddie Mac in ’08. That will cost approximately an amount of $259 billion to tax payers. This bailout is no doubt very expensive, perhaps the most in recent times. On top of that, Fannie is asking for $2.5 billion.
Together both Freddie and Fannie have made payments worth $16.7 billion. Another trend is the sundry allegations made by the Attorneys General that documents were not verified properly by the lenders. They signed documents even without cross-checking them. In many cases, people were also evicted homes without proper notices. Now the Attorneys General have asked states to conduct proper investigation into the matter. That will definitely affect the fortunes of the mortgage companies. The impact cannot be estimated, though.
According to recent data of the National Association of Realtors, people buying homes registered a drop. That’s because the number of foreclosed homes in the market dropped because many lenders have stopped foreclosing homes. These disruptions have derailed the housing market. The CEO of Fannie said the company wants to rein in losses. The high-risk mortgages of the previous years have taught them a lesson. Now they wish to build a profitable business where lending standards are tighter.
The loss was narrower in the third quarter. True, the company has asked for federal aid of $100 million. But the amount is definitely less than what it had asked in the last quarter — $1.8 billion. However, such positive tales do not mean that the company’s hard times are over. It may be mentioned here that the mortgage giants had been struck by immense losses. Hence, they tightened lending standards. The good news is that defaults on the new mortgages are much lower.
The housing market faces many challenges – the primary ones being poor economic growth and fluctuations in house prices.
[...] Fannie Mae and Freddie Mac are now trying to resume sales of cheap homes in Charleston in an effort to restart the economy. There are so many paperwork reviews and court cases going on right now that foreclosed home sales are at a virtual standstill. They are trying to get the ball rolling on some of these cases because this situation is having a negative impact on the housing market as it continues. [...]