Fannie Mae and Freddie Mac have announced they will buy back mortgages which are delinquent:
The two companies are repurchasing mortgage loans for which borrowers have missed at least four months of payments. At the end of last year, Fannie had about $127 billion of such loans, while Freddie Mac had about $70 billion.
Now they are doing this supposedly because it's cheaper. They guarantee the underlying securities and have to pay interest on those MBS (bonds) and it's turning out to be cheaper to just buy the bad loans back.
Yet, Bloomberg reports:
Investors would lose about $12.5 billion in forgone interest.
Bond holders pay more than the face value due to expected interest payments.
It seems some accounting rules changed at the end of the year, otherwise they would have needed more capital.
Accounting-rule changes are forcing all mortgages in Fannie Mae and Freddie Mac securities onto their balance sheets and limiting the financial impact of actual repurchases to the companies.
But.....Fannie and Freddie got an unlimited bail out at the end of the year.
Note that the actual homeowners, don't get a break at all, it's all about underlying securities, investments and toxic waste...and I guess once again...making sure no one takes too bad of a haircut, except for the homeowners of course.