Regulator says Fannie, Freddie might sell bad assets
Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) may sell some bad assets to the Treasury Department but a decision has not yet been made, the regulator of the two mortgage finance companies said on Sunday.
“They are financial institutions that could sell assets,” James Lockhart, director of the Federal Housing Finance Agency, said during a C-SPAN television interview. “Whether they will or not certainly the decision has not been made.”
Lockhart estimated that between 2 percent and 4 percent of Fannie and Freddie’s assets are bad mortgages.
On Friday, President George W. Bush signed into law a $700 billion bailout package for the U.S. financial industry aimed at allowing Treasury to buy soured assets from institutions that have stopped lending to each other as well as individuals and businesses (cash loan).
The two government-sponsored enterprises, which were seized by the government in early September, own or guarantee almost half of the country’s $12 trillion in outstanding home mortgage debt.
The first asset sale under the Treasury program is not expected to take place for at least four weeks, sources familiar with the financial rescue plan said on Friday.
“It’s very important for them that Treasury will be able to buy those, free up capital at those banks to make new mortgages that hopefully Fannie and Freddie can buy,” Lockhart said.
The U.S. financial crisis has dealt a massive blow to the lending industry on Wall Street and in Europe. Companies have collapsed under the weight of nonperforming mortgages and related securities.
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