Fannie, Freddie Hold Plenty Off the Books

NEW YORK (TheStreet) -- A look at what's lying off the books at Fannie Mae(FNM) and Freddie Mac(FRE) provides some clues as to why the mortgage-finance giants recently received a "blank check" from the Treasury Department for future capital needs, and why the Obama administration has delayed announcing restructuring plans.

On Jan. 1, financial firms were due to recognize all assets that were previously held off-balance sheet in special vehicles. Before the accounting rule change took effect, firms were not required to reserve capital against potential losses on those assets.

Here are some startling statistics from Fannie and Freddie's third-quarter reports, as the market awaits word of the timing of year-end results:

As of Sept. 30, Fannie Mae had $164 billion worth of nonperforming loans held off the books, vs. $33.5 billion in recognized NPAs. Freddie Mac had $74.3 billion off balance sheet, and $17.3 billion on the books. (Freddie's figures may be lower because it counts just 90 plus days past due, whereas Fannie counts 30 plus days past due.)

Fannie has $3.58 trillion worth of off-balance sheet assets, vs. just $890 billion in assets on the books. The firm estimated a $2.4 trillion maximum exposure to loss for off-balance sheet assets. Since it's a worst-case scenario, maximum exposure isn't considered a realistic representation of what firms would actually lose. Nonetheless, Fannie had reserved just $56.9 billion for those losses at Sept. 30.

Freddie Mac identified $1.5 trillion in potential off-balance sheet credit losses, and said it had reserved $28.6 billion against such guarantees.