Fannie, Freddie to need more rescue cash-regulator

WASHINGTON, July 30 (Reuters) - The U.S. Treasury Department will pour more cash into Fannie Mae FNM.N and Freddie Mac FRE.N over the next 12 months and never again see some of the $400 billion it has promised in aid, the mortgage finance companies' regulator said on Thursday.

"My view, and it is not always shared with everybody, is that some in the senior preferred (stock) will have to be left behind as they come out of conservatorship," said James Lockhart, director of the Federal Housing Finance Agency.

When regulators seized Fannie Mae and Freddie Mac in September, the Treasury bought preferred senior stock in each company and said the government's investment could reach as much as $100 billion each.

That promised aid was doubled early this year when the White House said it would rely on the two government-sponsored enterprises to help run its key mortgage aid programs.

After the first quarter of this year, the Treasury pumped $85 billion into the two companies in the form of preferred share purchases, Lockhart told a congressional committee in June.

Fannie Mae and Freddie Mac could return to financial health as the companies burn through toxic mortgages originated during the height of a five-year housing boom, said Lockhart on Thursday.

"My view is that their reserves will continue to climb ... for the next year or so," Lockhart told reporters at the conclusion of a housing policy symposium that he sponsored.

"At some point they will start to stabilize and come down. It may take two to three years before they return to strong profits."

The White House has said that it will next year present a blueprint for the future of the failed companies.

RENTAL OPTION MAKES SENSE

Earlier this month, Reuters reported that officials are weighing a plan to let borrowers who have fallen behind on mortgage payments avoid eviction by renting their home instead.

Lockhart said he wanted the government to expand that program.

"Certainly, I think it is an idea that should be pursued," he said. "If you do go through the messiness of foreclosure, in some cases it does make sense to leave the person in the house and let them rent it -- (if) it's not empty, not falling apart."

Freddie Mac is running such a pilot program on a month-to-month basis.

"The Freddie program is working and I think it may make sense to expand it," Lockhart said. (Reporting by Patrick Rucker; Editing by Neil Stempleman)