Losses related to mortgages guaranteed by Fannie Mae and Freddie Mac have some people concerned that the mortgage giants may opt to defer interest payments if their capital levels drop to less than required levels. Under certain circumstances and guidelines, the government-sponsored entities are able to suspend payments without triggering swap payments. "There is a grace period for five years," said Ricardo Kleinbaum, a BNP Paribas analyst. "However, you would have an event of default if a maturing bond were not paid back. It's also an event of default if the U.S. government takes them over or if there's a restructuring."
Published in Brief: