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.

4 comments:

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  2. 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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