Could GSEs Take$16 Billion Hit?

Fannie Mae and Freddie Mac could write down the value of their subprime and alt-A securities by as much as $16 billion in the fourth quarter, according to a report issued by Credit Suisse.

CS analyst Moshe Orenbuch estimates that Freddie's charge could be as high as $11 billion, Fannie's $5 billion.

Mr. Orenbuch said the GSEs, through September, have recognized "minimal impairments" on their roughly $230 billion in subprime and alt-A holdings.

Both GSEs declined to comment on the CS report. Fannie and Freddie are scheduled to release fourth quarter earnings at the end of February but have not yet specified an exact date.

So far, Fannie Mae and Freddie Mac have not identified their counterparties in regard to risk coverage on their AAA rated bonds, which include subprime mortgage assets.

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