On Thursday, the Federal Housing Finance Agency (FHFA) released its first Conservator’s Report regarding Fannie Mae and Freddie Mac's financial condition. FHFA will release a similar report on a quarterly basis following the filing of Fannie and Freddie's financial results with the SEC. According to FHFA Acting Director Edward J. DeMarco, the reports are intended to enhance public understanding of Fannie Mae and Freddie Mac's financial situation before and during conservatorship.

The report examines Fannie and Freddie's presence in the mortgage market; credit quality of their mortgage purchases; sources of their losses and capital reductions; and their loss mitigation activity. Among other points, the report notes that:

  • Despite popular perception that credit losses on Fannie Mae's and Freddie Mac's retained portfolios and private-label mortgage backed securities were the main drivers for the losses that triggered their conservatorships, the Investments and Capital Markets business segment (which includes their retained portfolios and credit losses associated with private-label mortgage-backed securities) accounted for only 9 percent of the institutions' capital reduction from the end of 2007 through the second quarter of 2010.
  • In contrast, their Single-Family Credit Guarantee business segments accounted for 73 percent of capital reduction over the same period.
  • Since the establishment of the conservatorships, credit quality of Fannie and Freddie's new mortgage acquisitions has improved substantially.