Fannie, Freddie to need almost USD 90 bn more: Whouse

The White House expects to shovel close to USD 90 billion to Fannie Mae and Freddie Mac over the next few years, though they are expected to start paying back more than they receive as of next year, according to the 2012 budget plan proposed on Monday.

The two firms were seized by the Bush administration in 2008 amid mounting losses from loans gone bad and have already taken more than USD 150 billion in direct taxpayer aid. The Obama administration expects that cumulative total to reach USD 236 billion by fiscal year 2021.

At the same time, the firms are required to pay back taxpayers in the form of a dividend payment that is expected to be larger than what they receive from the government starting in fiscal year 2013, which begins October 1 of next year.

The administration expects the two firms to receive USD 48 billion this fiscal year, which ends September 30. Next year they are seen receiving USD 29 billion while taking an additional USD 11 billion in the fiscal year that starts October 1, 2012.

That year, the firms will pay back USD 23 billion, the first year the dividend is larger than the payment to the companies known as government sponsored enterprises.

The administration expects cumulative net payments, which factor in how much has been paid back, to fall to USD 73 billion by fiscal 2021 from about USD 134 billion so far.

The White House on Friday proposed slowly doing away with the two firms, which buy up mortgages and bundle them to be sold as securities to investors, freeing up cash for lenders to lend again.

The Obama administration last week also laid out several options for Congress to reduce the government's role in the mortgage market.

More than 85 percent of new loans are backed by the government in some way, including Fannie, Freddie and the Federal Housing Administration, which does not make loans directly but insures those that meet certain standards

The latest figures on additional taxpayer aid for Fannie and Freddie could give ammunition to Republicans in the House of Representatives who want to eliminate altogether any government assistance for mortgages.

Democrats may seize on the faster payback to call for a slower and more gradual pullback of the government's support for the housing market.

President Barack Obama's budget plan unveiled on Monday also proposed reducing the role of the FHA in the USD 10.6 trillion US mortgage market.

His administration wants to raise the cost of loans backed by the FHA by a quarter percentage point, beginning in April 2011. That would make FHA loans more expensive, allowing private insurers to more easily compete.