Budget Director Peter Orzag

The Administration continues to deceive the public on the total losses of Fannie Mae and Freddie Mac.  Through the Office of Management and Budget, the Administration continues to treat the former GSE’s as off budget items and understates the potential losses from these Federal wards.  The CBO has even commented on this distortion estimating total losses of the two GSE’s at $289 Billion earlier this month, while the Administration through the OMG is disclosing only limited loss amounts based upon previously incurred cash infusions to Fannie and Freddie of $112 Billion. (Here).  The disparity in these figures was commented on in an earlier story on this blog.

Dead End Exit

Now that Fannie Mae and Freddie Mac have agreed to buy delinquent mortgages back from the existing guaranteed Mortgage Backed Security Bonds (MBS), the true cost of the Enterprise ’s losses is becoming more evident and the losses that taxpayers are facing through the Administration’s Christmas Eve blank check are significantly greater than they have previously reported.  “The companies are repurchasing mortgage loans for which borrowers have missed at least four months of payments. At the end of last year, Fannie had about $127 billion of such loans, while Freddie Mac had about $70” (Here)  So now the real cost to taxpayers has suddenly climbed from $112 Billion to over $300 Billion and will continue to climb as more MBS residential mortgages enter delinquency.