subject: mann International More Bailouts Ahead For Freddie And Fannie... [print this page] Mann International says that it is likely that Freddie Mac and Fannie Mae, the two nationalized mortgage finance companies that between them own or guarantee $5 trillion of residential mortgages in the United States, will go on costing the American taxpayer billions of dollars if unemployment and real estate values fail to improve and interest rates head higher.
So far, Freddie and Fannie have drawn down $145 billion of an unlimited government credit line which was put in place by former US Treasury Secretary, Henry Paulson when he bailed them out in 2008 at the height of the credit crunch.
Mann International believes that unemployment is likely to worsen as the effects of government stimulus wear off which, in turn, could lead to yet more foreclosures and further declines in house prices.
The sovereign debt crisis currently being played out in Europe will eventually be repeated in the US and they [the US] will have to implement their own deficit-reduction austerity measures which will undoubtedly result in stagnant growth and higher unemployment so it looks like Freddie and Fannies goose is cooked. said one Mann International analyst.
Nevertheless, the firm says that Freddie and Fannie are considered integral to the economic recovery in the US largely because hoping that private financing will fill the gap if the two firms go under is unrealistic. It would require at least two years of rising property values for private companies to return to the mortgage-securitization market so until then, say Mann International analysts, the taxpayer remains on the hook.
