Wall Street Journal (07/11/08) P. A12; Pleven, Liam
Fannie Mae and Freddie Mac are dealing with the ups and downs of the mortgage insurance industry, which sells coverage to borrowers unable to contribute a significant down payment on a home. As defaults have increased and home prices have declined nationwide, these insurers are facing mounting losses and declining stock values. If the two government-sponsored enterprises continue to buy mortgages that carry policies written by weakened insurers, they could be increasing their exposure to stressed firms. However, if Fannie Mae and Freddie Mac impose financial conditions for doing business that these firms are ultimately unable to meet, they could seriously damage the very firms that have promised to pay them billions.
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