Government Housing giants Freddie and Fannie are under-prepared for new wave of foreclosures

When Americans default on federally backed mortgages, the Government steps in and “buys” them from mortgage companies, and then incurs the cost to keep them maintained as they attempt to sell them on the market. The problem is, there is a staggering 1.7 million mortgages near default, and some economists are questioning whether HUD is ready for a new wave of foreclosures to hit.

Currently, the government is stretched thin in managing the more than 195,000 foreclosed homes it now owns and is not well prepared to handle a new wave of foreclosures that is about to hit, according to some economists who paint a less rosy picture of the housing market than politicians.

In fact, as of June 1, 2013, the inspectors general at the Federal Housing Finance Agency (FHFA) and the Department of Housing and Urban Development (HUD) warn that a staggering 1.7 million mortgages are 90 days or more delinquent, putting them in danger of Foreclosure.

The inspector general's report warns the housing market remains in a delicate state, with 1.7 million potential foreclosures  swelling on the horizon. Additionally, it is noted, the serious delinquency rate has hovered at 9.4 percent, or about 1.4 percent higher than a year ago.

Executives at Fannie Mae told the FHFA inspector general that "due to the high numbers of delinquent borrowers, among other challenges in the housing sector," it does not expect its inventory of repossessed houses to "return to pre-financial crisis levels for years."