The projected cost to bail out the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. are less than forecasted a year ago. The improvement was impacted by better-than-expected loan performance and falling interest rates.
The Federal Housing Finance Agency, which regulates the two secondary lenders, projected a year ago that draws under the stock purchase agreements with the Department of the Treasury could reach between $221 billion and $363 billion by 2013. The variance was dependent on the recovery of the U.S. housing market.
At the time, combined draws taken by Fannie Mae and Freddie Mac totaled $148 billion.
In a report released Thursday, the FHFA reported that bailout costs have now reached $169 billion. Fannie’s draws total $104 billion, and Freddie’s cumulative draws stand at $65 billion.
But the worst-case outlook has improved significantly.
Now the regulator estimates that Treasury draws will likely only reach between $220 billion and $311 billion by 2014.
Fannie’s draws could grow by another $115 billion in the worst-case scenario, while Freddie’s additional draws could reach $27 billion.
“The difference in the range of ending cumulative Treasury draws between the October 2010 projections and the October 2011 projections can be attributed primarily to the fact that actual results for the first year of the projection period in the October 2010 projections were substantially better than projected,” the FHFA said.
Helping improve the results was better-than-expected performance on modified loans and mark-to-market loans with high loan-to-value ratios.
A decline in seriously delinquent loans, higher REO sales prices than projected, and better net interest income all played a role in the improved forecast. Recently delayed foreclosures also impacted the projection.
