(Adds comment from Freddie Mac)
By Margaret Chadbourn
WASHINGTON, April 30 U.S. mortgage financiers
Fannie Mae and Freddie Mac may require as
much as $190 billion in additional taxpayer aid if the economy
suffers a severe downturn, their regulator said on Wednesday.
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, required by the Dodd-Frank Act, are
designed to show if regulated entities have enough capital to
weather a financial collapse similar to the 2007-2009 crisis.
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 in bailout funds,
while returning $202.9 billion in dividends to the U.S. Treasury
after posting record profits.
"It is important to remember that the stress test results
are modeled projections based on hypothetical economic
conditions prescribed by FHFA," said Freddie Mac spokesman Tom
Fitzgerald. "Actual outcomes may be very different."
Under their bailout agreement with the government, Fannie
Mae and Freddie Mac must sweep their profits into the Treasury
and cannot rebuild capital that would cushion any sudden shock
to the financial system.
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.
"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.
The two largest suppliers of mortgage funds are operating
under conservatorship while Congress considers an overhaul of
the mortgage-finance system. The Senate is considering taking
action to wind down the two taxpayer-owned companies, but the
measure faces an uncertain future.
Fannie Mae posted earnings of $84 billion for 2013, and
Freddie Mac reported a profit of $48.7 billion, both setting
records. Executives of both companies have said they expect to
see some profitable quarters in the future.
"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.
"We need to start reform now," Lew said, "and we need
legislation to achieve the fundamental reforms that protect both
consumers and taxpayers."
Fannie Mae and Freddie Mac own or guarantee about 60 percent
of all U.S. home loans.
(Editing by Bernadette Baum and Lisa Von Ahn)