Fannie, Freddie’s $24 Billion Glut Imperils Recovery

Fannie Mae and Freddie Mac’s combined inventory of foreclosed residential property has quadrupled in just three years and now stands at a record $24 billion. The number of properties on their rolls — now at nearly 242,000 — has increased fivefold.

That’s roughly a third of the total U.S. portfolio of repossessed homes. And it’s growing because the two mortgage companies operating under U.S. conservatorship aren’t finding buyers faster than new foreclosures come in.

So far, officials at Fannie Mae and Freddie Mac say, the two companies have been trying to stabilize neighborhoods by selling their massive inventory at prices that are close to market. With home seizures projected to increase this year, some housing analysts predict they may have to drop prices, with potentially far-reaching impacts on the real-estate market.

“The concern we have is less what Fannie and Freddie are showing at the moment as defaulted loans and more what’s in the shadow,” said Michael Feder, chief executive officer of Radar Logic, a real-estate data firm based in San Jose, California.

As the backlog swells and the Obama administration moves toward a complete revamp of the federal role in the housing market, pressure is growing on Fannie and Freddie to rethink their sales strategy for REO or real-estate-owned properties.

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