Seeking Alpha

GSE delay in bad loan recognition masking billions in losses

  • Those Fannie Mae (FNMA.OB +3.7%) and Freddie Mac (FMCC.OB +3.1%) profits that everybody wants a piece of may not be as high as reported.
  • The GSEs are masking billions of losses on delinquent loans because of the way they account for them, according to an FHFA report seen by Reuters. The inspector general's study says the companies are allowed an "inordinately long" two years to recognize the cost of 180-day delinquent mortgages.
  • Accounting changes are on the way, but the FHFA - noting the significance of the new policy - is allowing the companies until 2015 to make the adjustments and even then they'll be rolled out in stages. Neither Fannie nor Freddie have yet to publicly disclose the changes.
Comments (5)
  • This is a crock of s. Issue has been examinied by treasury and regulators and found to be acceptable. The inspector generals office has no say in the matter as they do not have the authority to alter accounting regulations. One more attempt to rob shareholders before the profits get too big to ignore. Sorry, they are already there and shareholders will have to be paid. You cannot ask that someting be written down when impaired if you do not allow for it to be written up if the value increases. Get over it. This train is moving and picking up speed.
    19 Aug 2013, 11:15 AM Reply Like
  • If the problem mortgages are so big and unmanageable , so much so, that accounting tricks have to be employed to hide the true enormity of the problem. Than F&F must to go back to the banks and make them accountable to pay up for the massive fraud. As it stands now, FHFA sues the banks, and whatever settlement is reached, the proceeds go directly to Treasury. Where do F&F get the opportunity to reclaim equity on their loss?

     

    If you are an F&F shareholder, it's "heads" you lose, "tails" you lose. There is something sinister going on here where the US Government is making an all out effort to deliberately disenfranchise legitimate shareholders' rights in a so called "free enterprise" economy. It is almost macabre to witness such disregard for property rights.
    19 Aug 2013, 11:52 AM Reply Like
  • Accounting rules allow F&F to hide loss and declare profit to pay treasury? I believe something is terribly wrong here.Shareholders still exist they are not dead yet.I don't know if share holders have a say in this.This is like some one comes to protect a company and steals from it?
    19 Aug 2013, 12:40 PM Reply Like
  • Interesting lawsuit now in Federal Claims Court by Hank Greenberg against US Treasury and the Fed for unlawful confiscation of private property, AIG , of course. Arguments made by Greenberg are suitable for a class action suit on behalf of FNMA and FMCC.

     

    It's quite controversial, to say the least, if not outright illegal, for the government to "commandeer" some companies i.e. FNMA and AIG and to let others off the hook with a small fee i.e. C, JPM, BAC, WFC etc.
    20 Aug 2013, 02:56 PM Reply Like
  • keep in mind during the real estate crisis, not all financial institutions were in trouble and need bailout from the government, but they were all forced to take the money so that the trouble banks doesn't get bank runs and such. JPM was one of the banks that did not need the bailout money but were force to take it.
    24 Aug 2013, 02:39 PM Reply Like
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