WASHINGTON Mortgage losses and a still-sour housing market could drive the cost of taxpayer support for Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) above the previous estimate of $291 billion, the Congressional Budget Office said on Thursday.
While the nonpartisan CBO did not change its August 2009 estimate, it said the inability of the housing market to find a bottom could mean the projection proves too small.
The firms' financial reports "suggest that losses have increased somewhat" since CBO's initial estimate because of the "continued deterioration of conditions in the housing market," CBO's Assistant Director Deborah Lucas told the House of Representatives Budget Committee.
Fannie Mae and Freddie Mac, which were seized by the government in 2008 as mortgage losses mounted, now support the bulk of the $10.5 trillion housing finance market.
They buy mortgages from lenders to ensure a stream of housing finance. They either hold those mortgage in their portfolios or repackage them as securities for investors.
The government has already pumped $130 billion into Fannie and Freddie so that they could meet their obligations, including debt payments.
But the two entities continue to suffer losses on loans made during the housing boom and years prior to 2009.
The broader CBO estimate of taxpayer support reflects potential market risk and includes all the obligations the entities had when they were placed into conservatorship.
(Reporting by Rachelle Younglai, Editing by Chizu Nomiyama)