GSE's Part II: Know Your Fannie & Freddie
What we know about Fannie (FNMA):
Fannie Mae, #1 in the $8 trillion home mortgage market.
$1 trillion in asset exposure.
$1 trillion notional (face value) derivatives exposure.
$26 billion of equity.
(to back up assets and derivatives = 20% of national GDP.)
Guarantor for $1.4 trillion of MBS held by other investors.
Retained Loan Portfolio $900 Billion.
Has Retained $550 Billion of MBS in portfolio.
As of 06/30/04 had a $10 Billion hedging loss.
Violated accounting rules related to derivatives.
Subsequent accounting scandal and corporate shakeup.
Must restate earnings back to 2001.
Restatement could result a $11 billion loss.
May have to record an additional loss of $2.4 billion.
Discovery of falsified signatures on documents.
Raises the possibility of criminal activity by company employees.
Shrunk portfolio by nearly 1.8 percent in February.
What we know about Freddie (FHLMC):
Freddie Mac, #2 in the $8 trillion home mortgage market.
$800 Billion asset exposure.
$1 trillion notional (face value) derivatives exposure.
$143 Billion of non loan assets.
(to back up $1.8 Billion total exposure.)
Guarantor for $770 Billion of MBS held by other investors.
Retained Loan Portfolio $660 Billion.
Misstated earnings by $5 billion for 2000-2002.
Subsequent accounting scandal and executive shakeup.
Has not reported results on a regular basis since scandal.
2003 net income fell 50 percent from $10 Billion to $4.9 Billion.
2004 net income fell 42 percent from $4.9 Billion to $2.8 Billion.
2004 profit fell 40 percent on losses from interest rate hedges.
2004 $4.5 billion loss on mortage asset protection derivatives.
Fannie Mae, #1 in the $8 trillion home mortgage market.
$1 trillion in asset exposure.
$1 trillion notional (face value) derivatives exposure.
$26 billion of equity.
(to back up assets and derivatives = 20% of national GDP.)
Guarantor for $1.4 trillion of MBS held by other investors.
Retained Loan Portfolio $900 Billion.
Has Retained $550 Billion of MBS in portfolio.
As of 06/30/04 had a $10 Billion hedging loss.
Violated accounting rules related to derivatives.
Subsequent accounting scandal and corporate shakeup.
Must restate earnings back to 2001.
Restatement could result a $11 billion loss.
May have to record an additional loss of $2.4 billion.
Discovery of falsified signatures on documents.
Raises the possibility of criminal activity by company employees.
Shrunk portfolio by nearly 1.8 percent in February.
What we know about Freddie (FHLMC):
Freddie Mac, #2 in the $8 trillion home mortgage market.
$800 Billion asset exposure.
$1 trillion notional (face value) derivatives exposure.
$143 Billion of non loan assets.
(to back up $1.8 Billion total exposure.)
Guarantor for $770 Billion of MBS held by other investors.
Retained Loan Portfolio $660 Billion.
Misstated earnings by $5 billion for 2000-2002.
Subsequent accounting scandal and executive shakeup.
Has not reported results on a regular basis since scandal.
2003 net income fell 50 percent from $10 Billion to $4.9 Billion.
2004 net income fell 42 percent from $4.9 Billion to $2.8 Billion.
2004 profit fell 40 percent on losses from interest rate hedges.
2004 $4.5 billion loss on mortage asset protection derivatives.
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