| WASHINGTON, April 30
WASHINGTON, April 30 Mortgage finance companies
Fannie Mae and Freddie Mac could need to
draw as much as $190 billion in additional taxpayer aid if the
economy suffered a severe downturn, their regulator said on
The Federal Housing Finance Agency, which oversees the two
taxpayer-owned companies, offered the estimate as the worst-case
scenario in an analysis modeled on the stress tests conducted on
the nation's biggest banks. The analysis relies heavily on U.S.
home price projections.
The stress tests are required by the Dodd-Frank Act and are
designed to determine whether regulated entities have enough
capital to weather adverse economic conditions.
A worst-case scenario would require total aid ranging from
$84.4 billion to $190.0 billion, depending on certain accounting
assumptions, for the two companies through 2015. So far, Fannie
Mae and Freddie Mac have drawn $187.5 billion from the U.S.
Treasury, while returning $202.9 billion in dividends after
posting record profits.
Under their bailout agreement with the government, they are
required to sweep their profits into the Treasury and cannot
rebuild capital that would cushion any sudden shock to the
"These results of the severely adverse scenario are not
surprising given the company's limited capital," Fannie Mae
Senior Vice President Kelli Parsons said in a statement.
Regulators took control of Fannie Mae and Freddie Mac in
2008 after losses stemming from subprime mortgage investments
pushed them to the brink of insolvency.
The two largest suppliers of mortgage funds are operating
under conservatorship while Congress considers an overhaul of
the mortgage-finance system.
Fannie Mae posted a record $84 billion profit for 2013, and
Freddie Mac reported its largest profit of $48.7 billion.
"The system today continues a flawed dynamic where taxpayers
must support future losses at Fannie Mae and Freddie Mac should
there be another downturn in home prices," Treasury Secretary
Jack Lew told a congressional committee on Tuesday.
Fannie Mae and Freddie Mac own or guarantee about 60 percent
of new mortgages. The Senate is considering taking action to
wind down the taxpayer-owned mortgage financiers, but the
measure faces an uncertain future.
"We need to start reform now - and we need legislation to
achieve the fundamental reforms that protect both consumers and
taxpayers," Lew said.
(Editing by Bernadette Baum)