WASHINGTON–The start of the New Year meant the end of a U.S. Treasury short-term credit facility as well as the end of a GSE mortgage-purchasing program. The Treasury ceased purchasing mortgage-backed securities from Fannie Mae, Freddie Mac and FHLBs on Dec. 31; the government agency bought about $220 billion in assets from those entities.
The Treasury also shuttered a credit facility designed to provide a backstop of liquidity for GSEs that had gone unused. That facility had been was under the Housing and Economic Recovery Act of 2008 and was one of several HERA programs that came to a close at the end of 2009.
While Fannie and Freddie will remain in conservatorship, the Treasury is amending its preferred stock purchase agreement with both entites to allow its funding commitment to “increase as necessary” to prevent net worth erosion over the next three years.
This effectively removes the $200 billion limit set in the original agreement and allows both GSEs to lose an unlimited amount of money and leave taxpayers on the hook for the losses, despite the fact that both institutions are nowhere close to the established limit yet.
Freddie has received $51 billion in Treasury funding while Fannie has received $60 billion in taxpayer cash to offset its losses. New guidelines on the government’s role in the housing market are expected to be released with the 2011 budget guideline in February.
The Treasury said that new underwriting standards at the GSEs and FHA “demonstrate a commitment to prudent housing finance policy that enables a transition to an environment where the private market is able to provide a larger source of mortgage finance.”
