Fannie Expected to Draw From Line of Creditby Tim Manni
Fannie Mae announced yesterday that their regulator, The Federal Housing Finance Agency (FHFA), will submit a request to the Treasury Department to draw funds from the $100 billion line of credit promised to them when the GSE was placed under conservatorship back in September. The mortgage giant said it will need up to $16 billion because “of the effect that the company’s anticipated net loss (primarily as a result of credit expenses and fair value losses during the fourth quarter of 2008)…”
This is the first time Fannie has requested cash from the Treasury’s line of credit. Freddie Mac made their second request last week which is expected to tap about half of their $100-billion line.
According to Bloomberg.com, “The companies have posted five consecutive quarters of losses totaling $68.4 billion combined.”
Since the ongoing housing crisis is obviously to blame for the GSE’s poor performance, it raises the concern that as the downturn continues, Fannie and Freddie’s credit line may soon become depleted:
“Hopefully policymakers are proactive in upping the $100 billion backstop,” Setia said. “You don’t want them to get to those levels and have to revisit the issue.”
Thanks to the conservatorship, the government will have little option other than to supply each enterprise with all the funds necessary to stay functional.