This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Wall Street Whispers: Fannie, Freddie Are Liquidating (Kind Of)

Still, at Sept. 30, the firm held $710.2 billion in its retained portfolio, vs. $755.3 billion at year-end. It was well within the Treasury Department's requirement to shrink its loan portfolio from a maximum of $900 billion at Dec. 31, to $810 billion a year hence.

"The FHFA has stated its expectation that we will not be a substantial buyer or seller of mortgages for our mortgage-related investments portfolio, except for purchases of seriously delinquent mortgages out of PC trusts," the company said in its quarterly filing.

Fannie Mae hasn't reported third-quarter results yet. However, its retained portfolio moved the opposite way during the first half of 2010 - again, because of put-backs from mortgage trusts.

Fannie's retained portfolio grew 6% through June 30, to $817.8 billion from $772.7 billion at the start of the year. It bought back $170 billion worth of delinquent loans in mortgage-backed securities (MBS) trusts during the first half of the year.

But, meanwhile, both Fannie and Freddie continued to "liquidate" holdings of subprime, Alt-A and other "toxic" mortgage debt by tens of billions of dollars. There are a couple of ways Fannie and Freddie can go about doing so. They can sell related MBS in the market - though there are few buyers, usually offering pennies on the dollar. Additionally, when a property enters foreclosure to become "real-estate owned," or REO, it is also considered liquidated.

At Sept. 30, Freddie Mac had nearly 75,000 of REO properties, worth $7.4 billion - up 19% over the past three months and up 77% year-over-year. At June 30, Fannie Mae had nearly 130,000 single-family properties considered REO, worth $13 billion - more than double the year-ago level.

The trends are telling in several ways.

First, Fannie and Freddie are providing the support needed for the housing market's recovery by acting as a conduit for mortgage finance. But they're also trying to get rid of a huge number of bad loans in a friendlier manner than their banking peers - one with "integrity," as official statements say.

Secondly, Fannie and Freddie are also getting lots of pushback from private investors in the MBS they stand behind. The hundreds of billions' worth of buybacks Fannie and Freddie have accepted make the amount of loans they're pushing onto large servicers like Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) look like relative chump change.

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,001.22 -38.27 -0.22%
S&P 500 1,988.40 -3.97 -0.20%
NASDAQ 4,538.5510 +6.4470 0.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs