Reuters is reporting that government-backed mortgage lender Freddie Mac expects to lose $10-12 billion before the subprime meltdown is over. Previously, everyone was freaking out about their $2 billion loss.
“We would expect that our total future credit losses on our current book of business would total approximately between $10 billion and $12 billion,” Chief Executive Officer Richard Syron told an investors conference sponsored by Goldman Sachs.
Is Syron just being a gloomy grouch?
“If I were you, I would want in this time period someone running one of these companies (Fannie Mae and Freddie Mac) to err on the side of pessimism rather than optimism,” he said.
Hey, good point.
In other news, both Freddie and Fannie have decided to stop buying so many bad loans and are are changing their criteria for purchasing delinquent home loans, in order to reduce the number they buy from investors.
The companies customarily repurchased most mortgages once they were 120 days past due. Freddie Mac said it will now purchase delinquent loans that were part of larger securities issued by the firm when the mortgages are at least 120 days past due and either the mortgage has been modified, a foreclosure sale occurs, or the cost of payments to security holders exceeds the cost of holding the loans. It will also repurchase mortgages that are 24 months delinquent.