NEW YORK — They own or guarantee $5 trillion worth of mortgages­ – nearly half of all the country’s outstanding home loan debt-and they’re crashing. Big time. Fannie Mae and Freddie Mac are struggling with an investor loss of confidence so great that, while they’re unlikely to go under, they could conceivably see their ability to function impaired. That would wreak yet more havoc on an already wrecked housing market- making loans tougher to come by and possibly pushing hundreds of billions of dollars in cost onto U.S. taxpayers. How could the companies end up in such awful straits? Given the way they were created and run, a better question might be: how could they not? The two companies are so-called government-sponsored enterprises, created by Congress in 1938 (Fannie) and 1970 (Freddie) to help more Americans buy houses. Their mandate is to maintain a market for mortgages – buying loans from banks, repackaging them as bonds, and selling those securities to investors with a guarantee that they will be paid. This makes lending more tempting for banks because Fannie and Freddie take on risks like missed payments, defaults and swings in interest rates. But […]

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