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Market Updates

GSEs Hide Losses Despite Calls for Transparency

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ostrichesThe Office of the Inspector General of the Federal Housing Finance Agency (OIGFHFA) recently released a statement accusing Fannie and Freddie of shielding billions of dollars in losses.

That should come as a shock to no one.

More disappointing, the statement and accompanying documents identify FHFA as complicit in this scheme to deceive Congress and taxpayers about the true health of the failed Enterprises.

This story begins in April 2012, when the Inspector General issued an advisory bulletin recommending changes to Fannie’s and Freddie’s accounting practices. In the most basic terms, the problem centers on how Fannie and Freddie treat single-family loans in their portfolio that are more than 180 days past due. The chances of these loans ever getting current again are extremely rare; therefore, they are generally categorized as losses. Accountants at Fannie and Freddie did not classify these loans as losses, and that raises questions about the true health of the housing giants.

Billions in Losses



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