Thursday, October 21, 2010

The Fannie-Freddie Problem is not as severe as the headlines would suggest

Page 10 of the FHFA report, gives forward expected losses under three scenarios.  The third is really awful--it assumes a further reduction in house prices by 1/4, which would be a lot.  But under the other two scenarios, the net cost to taxpayers (draws less dividends owed to Treasury) would be $6 to 19 billion.  This is real money, but hardly cataclysmic.  It does suggest that the vast majority of the losses are already behind us.

6 comments:

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Unknown said...

The tough part of the whole thing is that the banks can't drop all the foreclosed homes on the market at once and decimate prices. We are still roughly 3 years away from working through all the distressed inventory at the pace we are going simply because the banks are acting like the DeBeers of the distressed housing market.

-Matt Tackett
www.urbanhomespdx.com

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