Fannie, Freddie May Record More Losses, Ofheo Says

Bloomberg (07/22/08); Kopecki, Dawn
The Office of Federal Housing Enterprise Oversight (OFHEO) states that Fannie Mae and Freddie Mac may have to take more writedowns after increasing their purchases of non-guaranteed subprime and Alt-A mortgage securities around the same time that other investors were migrating to less risky investments. According to the regulator of the two government-sponsored enterprises, the value of $217 billion of the non-agency securities is declining as other financial companies write down their holdings. Privately issued securities backed by subprime mortgages comprised 9.2 percent of the two GSEs' combined portfolio, while Alt-A accounted for roughly 5.8 percent. OFHEO states that wagering big on private-label securities in 2004 and 2005 "significantly increased their exposure to fair value losses from changes in market prices."