Fannie Mae and Freddie Mac are possibly masking billions of dollars in losses because of the level of delinquent home loans they carry, a federal watchdog said Monday, adding that the companies should immediately be required to recognize the costs of some bad mortgages.
In 2012, the Federal Housing Finance Agency began work on accounting changes to require the two housing-finance firms to set aside loan-loss reserves for mortgages delinquent at least 180 days. The new standard is set to go into effect in 2015.
In its report released Monday, the FHFA’s inspector general called the timeline for implementation “inordinately long.”
The change in the accounting treatment of these delinquent loans potentially could require Fannie and Freddie, which have rebounded to enormous profitability in the past two years as the housing market recovered, to “charge off billions of additional dollars related to loans,” the report stated.
The inspector general’s report, dated Aug. 2, called on the FHFA to require the firms to implement the new accounting changes at a faster pace and expressed concern that Fannie Mae and Freddie Mac were not recognizing the potential losses in their public financial statements.
Fannie Mae and Freddie Mac were seized by the U.S. government in September 2008 as rising mortgage losses threatened them with insolvency. The mortgage companies have cost taxpayers almost $188 billion to stay afloat.
Fannie Mae on Aug. 8 reported a $10.1 billion profit for the second quarter and said it would send a $10.2 billion payment to the Treasury for its federal aid. For the second quarter, Freddie Mac posted its second-largest quarterly profit, reporting net income of $5 billion, and said it would make a $4.4 billion dividend payment as part of the reimbursement for its rescue aid.
Amazon.com, the Web site of the world’s largest online retailer, went down for about 15 minutes Monday in a rare outage for many users across the United States and Canada.
It was unclear what triggered the rare disruption. The company, whose Amazon Web Services is designed to ramp up server capacity for customers to prevent outages, did not respond to multiple requests for comment.
Earlier Monday, users from New York and Toronto to San Francisco got only error messages when trying to access the popular shopping Web site. The news came less than a week after the Web site of the New York Times went down for about two hours.
Amazon has $86 billion in annual gross merchandise volume, including its business through third-party sellers, according to consultants at RetailNet Group. Going by that estimate, Amazon processes some $163,622 in transactions per minute on average.
l Shares of Barnes & Noble sank 5 percent, to $16.67, on Monday, a day before the bookseller reports quarterly earnings. Barnes & Noble said last month that chief executive William Lynch was leaving, but it did not name a replacement. Analysts anticipate a bigger loss on lower revenue for the first quarter.
l The rollout of a new program to limit wild price swings in publicly traded securities triggered dozens of trading halts Monday as highly illiquid names were phased into the program. Forty-eight exchange-traded products were halted or paused on NYSE Arca, a unit of exchange operator NYSE Euronext, according to trading information provided by exchange operator Nasdaq OMX Group. Seven other securities were halted on Nasdaq. About 570 securities were rolled out on NYSE Arca as part of the second phase of the “Limit Up, Limit Down” program.
l A fire at the largest oil refinery in the United States has knocked out more than half of its output for at least two weeks at the Motiva plant in Port Arthur, Tex. Royal Dutch Shell, which owns the refinery with Saudi Aramco, said the fire Saturday, the second in a week, slowed and shuttered units at the 600,000 barrel-per-day plant and hurt production. The plant accounts for 3.4 percent of U.S. refining capacity.
l Tesla Motors said its flagship Model S sedan received the highest crash-test ratings of any car tested by U.S. regulators. The
battery-powered sedan, with a base price of about $70,000, got five-star ratings in every safety and crash category set by the National Highway Traffic Safety Administration, the electric-car maker said Monday. The car has the “lowest likelihood of injury to occupants” and exceeds the performance of SUVs and minivans, Tesla said.
l Zillow, operator of the largest U.S. real estate Web site, agreed to acquire StreetEasy for $50 million in cash to expand its coverage of the New York market. StreetEasy has about 1.2 million monthly unique users, primarily residential real estate shoppers in the New York region, the companies said in a statement Monday. Zillow reported 61 million unique visitors at the end of July.
— From news services
l Earnings: Barnes & Noble, Best Buy, Home Depot, J.C. Penney.