US Watchdog Questions Spending at Fannie, Freddie

DEREK KRAVITZ | AP Real Estate Writer

WASHINGTON (AP) – A U.S. government watchdog is questioning $600,000 that taxpayer-funded Fannie Mae and Freddie Mac spent on an October convention, according to a report released Thursday.

About half of the spending was "of questionable value," the inspector general of the Federal Housing Finance Agency said.

Fannie and Freddie sent about 90 employees to the Mortgage Bankers Association Annual Convention and Exposition at the Hyatt Regency in Chicago in early October. About $280,000 was spent on sponsorships and business meals.

Freddie spent $80,000 to be a so-called platinum-level sponsor of the mortgage conference. Fannie spent $60,000 to be a gold-level sponsor. Sponsorship perks include banners, advertisements in the convention program, complimentary registrations and additional space at the convention.

Each company also hosted two dinners for guests.

FHFA, the government regulator overseeing the two firms, sent Fannie and Freddie a letter in December stating that all expenses be "consistent with the direction and goals" of the government conservatorship.

Taxpayers have spent more than $150 billion to rescue Fannie and Freddie, the most expensive bailout of the 2008 financial crisis. It could cost nearly $200 billion more to support the companies through 2014 after subtracting dividend payments, according to FHFA.

Pressure has mounted to eliminate Fannie and Freddie and reduce taxpayers' exposure to further risk. The Treasury Department put forward a plan a year ago to slowly dissolve Fannie and Freddie, although that process could take up to seven years. Abolishing Fannie and Freddie would transform how homes are bought and redefine who can afford them.

McLean-Va.-based Freddie and Washington-based Fannie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. Along with other federal agencies, they backed nearly 90 percent of new mortgages over the past year.

Fannie and Freddie buy home loans from banks and other lenders. They package them into bonds with a guarantee against default and then sell them to investors around the world.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.