Posted by WReporter
on May 7th, 2011 in Business
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On Friday, Fannie Mae asked for $8.5 billion in additional aid from the government. The company says it lost money due to more loan defaults on homes purchases. They say $8.7 billion was lost in the first three months of this year. Fannie Mae has requested over three times what they asked for in the quarter before. The rescue will be the most expensive bailout to date of one company—costing about $100 billion so far. Rescuing Fannie Mae and Freddie mac will cost a combined amount of more than $259 billion to taxpayers.
During the first three months of the year, January, February, and March, home prices dropped about 1.8 percent. Abandoned homes and foreclosures grew. Michael Williams, President and CEO said, “We expect our credit-related losses to remain elevated in 2011 as we continue to be negatively impacted by the prolonged decline in home prices.” When homeowners are unable to afford their monthly mortgage payments or they owe more than the property is now worth due to dropping property values, owners default. Fannie Mae and Freddie Mac must take care of the losses by paying for them.
Fannie Mae, based in Washington, and Freddie Mac, based in McLean, Va., buy home loans from banks and other lenders. They currently own and guarantee about half of all mortgages in the nation. The loans are guaranteed against default by the company.
In February, President Obama and his administration showed a plan to slowly phase out the mortgage companies. He wants to remove the government’s role in home loan lending. Reversing the policies in place to encourage home ownership may increase mortgage costs and fewer people will be homeowners.