cnbc.com

For American taxpayers, now on the hook for some $145 billion in housing losses connected to Fannie Mae and Freddie Mac loans, that amount could be just the tip of the iceberg.

According to the Congressional Budget Office, the losses could balloon to $400 billion. And if housing prices fall further, some experts caution, the cost to the taxpayer could hit as much as $1 trillion.

Two things are clear: Taxpayers don’t want to foot the bill, and Fannie and Freddie, taken over by the government in 2008 to stanch the financial bloodletting, need a major overhaul.

“Some of us who don’t even own homes are paying to support others and their home ownership, and they ask ‘why?’ said Robert J. Shiller, a Yale University economics professor and co-creator of the S&P/Case-Shiller Home Price Indices.

The indices measure the US residential housing market by tracking changes in the value of residential real estate both nationally and in 20 metropolitan regions.

Shiller added that the mission of Fannie and Freddie should be severely cut back “so that they’re not helping middle-class homeowners, [but] they’re helping poor people get into the housing market.”

At the crux of the financial crisis, the government took over Fannie and Freddie to avert possible massive losses for banks, money-market funds and, perhaps, most importantly, foreign institutions that purchased billions of Fannie and Freddie debt because of its implied government guarantee.

The Chinese, for example, had invested heavily, and the US decided it didn’t want them to take a loss on their investment.

One possible scenario for the entities is to turn them into utilities, said Sean Dobson, CEO and chair of Amherst Securities, whose company trades as much as $50 billion in mortgages annually.

“Freddie and Fannie could be used to standardize the mortgage product,” Dobson said, “to completely describe what the risks are and then act as a conduit for the capital markets to take the risk.”