Agency Loss Estimates Lack Independence, Verifiability
More than three years into the conservatorship of Fannie Mae and Freddie Mac, moribund housing-market conditions remain a drag on households’ wealth trajectories and their confidence in the broader economic recovery. While a robust improvement in national price trends ultimately depends on job creation and endogenous demand for single-family homes, indications of a gradual stabilization of the housing-market trajectory are emerging.
As a function of updated housing-market expectations, as well as “actual results from the first of the projection period that were substantially better than projected,” the Federal Housing Finance Administration (F.H.F.A.) released a report last week updating its projections of potential agency draws from the Treasury under conservatorship. The upside adjustment to the projections should be considered in context, however, given limited transparency of the modeling process supporting the new estimates.
