Cost of Fannie / Freddie Bailout Less than Previously Thought

The Federal Housing Finance Agency, which oversees mortgage giants Fannie Mae and Freddie Mac, issued revised estimates on the cost of bailing out the two companies on Thursday, indicating the cost will be nearly 20 percent lower than previously estimated. The agency now forecasts the combined cost of propping up the two agencies at $124 billion through 2014, down from an estimate of $154 billion offered last year.

The agency said that $124 billion was the expected cost, but offered a range of $121 billion and $193 billion, somewhere in which the actual cost will be depending on the economy, housing market conditions and the performance of the loans the two entities guarantee. The downward revision in the cost estimate, FHFA officials said, was due to Fannie and Freddie requiring less assistance over the last year as their financial results improved.

Even with the expected cost being lowered, the rescue of Fannie and Freddie will easily be the most expensive bailout stemming from the 2008 financial crisis. The two companies were seized by federal authorities in September 2009 and placed in a government-run conservatorship before large amounts of money were pumped in to cover losses stemming from failed mortgages they owned or guaranteed. Thursday’s report estimated that future earnings of the two companies will begin reducing the amount lost either next year or in 2013.

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