Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case

The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.

Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.

Fannie and Freddie own or guarantee 53 percent of the nation’s $10.7 trillion in residential mortgages. Millions of bad loans issued during the housing bubble remain on their books, and delinquencies continue to rise.

The companies’ liabilities stem in large part from loans and mortgage-backed securities issued between 2005 and 2007. Directed by Congress to encourage lending to minorities and low- income borrowers, Fannie and Freddie lowered their standards to take on high-risk mortgages. Fannie and Freddie also raised billions of dollars by selling their own corporate debt to investors around the world. The bonds are seen as safe because of an implicit government guarantee against default.