Regulator: Fannie, Freddie Bailout Not Likely

NEW YORK -- Mortgage financing giants Fannie Mae and Freddie Mac could face further problems if home prices continue to plummet, but a taxpayer bailout is not likely, said the federal regulator charged with overseeing the two firms, CNNMoney.com reported Thursday.

James Lockhart, director of the Office of Federal Housing Enterprise Oversight, told CNNMoney.com Wednesday that the overwhelming problem for Fannie Mae and Freddie Mac is the decline in home prices in recent years and forecasts of further declines this year.

He said the home price declines are a bigger problem for the firms than other issues, including: credit market volatility; billions in unrecognized losses on their books; and hundreds of billions in investments in securities backed by subprime mortgages, CNNMoney.com reported.

Lockhart said despite all those shortcomings, the firms' current capital position can help them weather at least some further declines, CNNMoney.com reported.

-- NYSSCPA.org News Staff

Posted on 5/8/08