Fannie, Freddie bailout might cost taxpayers billions less than estimated

The government’s bailout of Fannie Mae and Freddie Mac might end up costing taxpayers billions less than originally estimated, the mortgage giants’ regulator said Thursday.

In a new report, the Federal Housing Finance Agency (FHFA) said the actual performance of the government-sponsored enterprises (GSEs) had been “substantially better” than originally projected, lowering the overall bill for the bailout, a longtime sore spot with GOP lawmakers.

{mosads}So far, Fannie and Freddie have tapped the government for $141 billion to stay afloat. Last year, the FHFA anticipated the GSEs would cost taxpayers $154 billion, but now anticipates the bailout could cost $125 billion through 2014, as the two GSEs could actually begin returning funds to taxpayers in the next few years.

However, the FHFA made clear that these projections are not expected performance, but simply an analysis of how much help the GSEs would need under three different home-price scenarios.

The FHFA provided the scenarios, and the GSEs plugged them into their own internal models to predict how they would fare.

Under a more optimistic model, the bailout could cost as little as $121 billion, or climb to $193 billion under worse economic assumptions.

So far, Fannie and Freddie are beating bailout expectations. In the first year of projections, the GSEs actually tapped the Treasury Department for $19 billion to $73 billion less than anticipated, depending on what scenario was applied.

The reason for the boost was because mortgages performed better than anticipated, as fewer became delinquent than once expected.

In addition, banks opting to delay their foreclosure proceedings helped reduce the GSEs’ burden.

After the government brought the GSEs under federal conservatorship in 2008, Fannie and Freddie were required to make 10 percent dividend payments to the Treasury.