Fannie, Freddie repair bill: $1T

The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all US home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.

Fannie and Freddie — now 80 percent owned by US taxpayers — already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund.

That surpasses the amount spent on rescues of American International Group, General Motors or Citigroup, which have begun repaying their debts.

“It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry.

Fannie, based in Washington, DC, and Freddie in McLean, Va., own or guarantee 53 percent of the nation’s $10.7 trillion in residential mortgages, according to a Federal Reserve report.

Millions of bad loans issued during the housing bubble remain on their books, and delinquencies continue to rise. How deep in the hole Fannie and Freddie go depends on unemployment, interest rates and other drivers of home prices, according to the companies and economists who study them.

The Congressional Budget Office calculated last year the firms would need $389 billion in federal subsidies through 2019, based on assumptions about delinquency rates of loans in their securities pools.

The White House’s Office of Management and Budget estimated in February that aid could total as little as $160 billion if the economy strengthens.

Barclays Capital analysts put the price tag as high as $500 billion in a December report on mortgage-backed securities, assuming home prices decline another 20 percent and default rates triple.