Two companies that handled 80 percent of the U.S. mortgage business in the first quarter of 2008 may be in trouble, financial leaders in Washington said.

The two federally backed lenders -- Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association -- are reportedly holding more than $5 trillion in debt, while counting on a cushion of $83 billion, The New York Times reported Tuesday.

Key legislators are urging the lenders, known as Freddie Mac and Fannie Mae, to raise more capital as the value of homes continues to fall.

They are on real thin ice financially, U.S. Senate Banking Committee member Sen. Richard C. Shelby, R-Ala., told the newspaper.

The companies, however, are enjoying a period of growth as other lenders have backed away from the mortgage business, the report said.

The safety net for the two private companies exceeds the minimum by $7 billion, the Times reported.

They raised a combined $13 billion in capital in 2007. But, if losses at the private companies created by Congress exceed their cushion, taxpayers may be called on to bail them out.

Further, financial problems at either one would put more strain on the troubled mortgage market, the report said.

Copyright 2008 by United Press International


Publication date: 06 May 2008   

Source: UPI-1-20080506-07440100-bc-us-mortgages.xml

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