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Fannie Mae Creates Housing Mirage With Bum Loans

April 26th, 2009
Categories: News

Link: http://www.bloomberg.com/apps/news?pid=20601039&sid=aColIYAe.RaU&refer=home

Give money away. That was a solution to the housing crisis mortgage giant Fannie Mae hit on last year. Faced with growing numbers of homeowners unable to make mortgage payments, Fannie decided to fund loans to borrowers that were instant losers. The point was to buy time. Even though those loans resulted in a $453 million loss, they helped keep troubled homeowners from defaulting. That meant Fannie for now didn’t have to make good on loan guarantees that may have cost it as much as $2.4 billion. The big game of kick the can strikes at a deep-seated fear among many investors -- that banks and others faced with mounting housing losses are finding all manner of dubious ways to push a day of reckoning into the future.

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