Industry NewsMortgage

Gov’t stands behind Fannie, Freddie

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In a move to reassure investors as it makes long-term plans for Fannie Mae and Freddie Mac, the Obama administration says it's prepared to step in and buy as much preferred stock in the companies as necessary to offset reductions in their net worth over the next three years.Since the mortgage guarantors were placed in government conservatorship in September 2008, the Treasury Department has helped prop the companies up by purchasing $60 billion in Fannie Mae preferred stock and investing $51 billion in Freddie Mac.Although that's well short of the $200 billion per institution limit established at the time, it's expected that Fannie and Freddie's losses will continue to mount as unemployed and underwater borrowers stop making their mortgage payments.The decision to allow the cap to increase enough to cover "any cumulative reduction in net worth over the next three years" should "leave no uncertainty about the Treasury's commitment to support these firms as they continue t...