The Future of Fannie Mae and Freddie Mac


A housing sector without Fannie Mae and Freddie Mac is a possibility, Edward J. DeMarco, director of Federal Housing Finance Agency (FHFA), told CNBC Thursday.

Demarco said another future scenario might involve Fannie and Freddie remaining in business, but without dependence on the federal government.

But, he cautioned, success could happen only if an infrastructure is in place that allows private firms to re-enter what is a $10 trillion mortgage market.

Either scenario is possible, said DeMarco, but both “need appropriate a transition. Our housing market is still quite fragile.”

The Housing Fix -- A CNBC Special Report >> See Complete Coverage
The Housing Fix -- A CNBC Special Report >> See Complete Coverage

“We cannot flip that switch tomorrow and expect to turn it over to the private sector, because the plumbing is not there,” he said.

To date, taxpayers have been are on the hook for some $145 billion in lossesconnected to the troubled housingmarket. The Congressional Budget Office estimates that figure could balloon to $400 billion, and some experts have even put a $1 trillion price tag on those taxpayer-responsible costs.

DeMarco acknowledged that there will be more losses, but said that some of the figures being bandied about are “extreme.”

“Folks need to understand that the losses that they keep reading about every quarter are losses resulting from defaults on mortgages that were written principally between 2005 and the early part of 2008,” he said.

“We are still working through that book of business. There are still mortgages that originated during that time that are turning into delinquencies, and serious delinquencies, and it’s the recognition of those losses of what are being reflected in these draws on the Treasury department.”

Among the bright spots, he said, is that in the first quarter of 2010, delinquencies dropped, especially the 30-day ones, while housing prices have been relatively stable since early-2009 and are climbing up in some states.