According to newly released worst-case-scenario projections from the Federal Housing Finance Agency, Fannie Mae and Freddie Mac could end up drawing as much as $363 billion from the U.S. Treasury Department through 2013.
To date, the government-sponsored enterprises (GSEs) have drawn $148 billion from the Treasury under the terms of the senior preferred stock purchase agreements.
Other, less-severe projections from the FHFA suggest draws of $221 billion and $238 billion.
The FHFA says it formulated its projections based on the approach taken by federal banking agencies last year in the Supervisory Capital Assessment Program. Those approaches produced potential, not expected, outcomes, the FHFA says.
"These projections are intended to give policymakers and the public useful snapshots of potential outcomes for the taxpayer support of Fannie Mae and Freddie Mac," says FHFA Acting Director Edward J. DeMarco. "These are not predictions; the results reflect the potential effects of a limited set of hypothetical changes in house prices, a key variable driving credit losses for the Enterprises."
The projected credit losses in each scenario primarily reflect possible further losses on the GSEs' pre-conservatorship mortgage business. The FHFA says that as time passes, GSE dividend payments on Treasury preferred stock make up larger portions of the draws.
Under the scenarios used in the projections, if dividend payments on preferred stock were excluded, cumulative GSE draws range from $142 billion to $259 billion.
SOURCE: Federal Housing Finance Agency