|
 Once they make their latest payments in September, they will have
returned $218.7 billion to taxpayers in return for the $187.5
billion in aid they received after being placed under the
government's wing at the height of the financial crisis.
The two companies, which buy mortgages from lenders and repackage
them into securities they sell to investors with a guarantee, were
seized by the U.S. government in 2008 as they teetered on the brink
of insolvency.
Under their bailout terms, the firms turn their profits over to the
Treasury as dividends on the government's controlling stake.
Fannie Mae, the nation's largest source of mortgage funds, earned a
$3.7 billion profit between April and June and will turn it over as
its dividend payment. Freddie Mac, the No. 2 mortgage provider, will
pay the Treasury $1.9 billion.
Shares for the two companies edged higher.
The dividends had swelled in recent quarters as the companies
received funds from legal settlements and booked big profits on
accounting gains from the recognition of deferred tax assets.
Fannie Mae's profits - and its dividend payment - were lower than in
the first quarter largely because of a reduction in settlement
payments. Freddie Mac reported $400 million in settlements in the
second quarter, which was just a sliver of what it took in the first
quarter.
The regulator for the two firms had sued 18 financial institutions
for allegedly misleading Fannie Mae and Freddie Mac about the
soundness of mortgages that underlay securities they sold.
Both the settlements and the tax matters appear to be largely
behind, Fannie Mae Chief Executive Tim Mayopoulos said on a
conference call with reporters. In a positive sign for future
profits, Fannie Mae said rising home prices had helped its bottom
line.
"This quarter gives you a good sense of a normalized environment,"
he said.
The U.S. housing market slowed sharply in 2013 after mortgage rates
rose, but home resales have been rebounding since early this year.
[to top of second column] |
Fannie Mae and Freddie Mac have been a minor cash cow for the
Treasury in recent years, paying back all their bailout funds and
more. But their obligation to turn over all their profits to the
Treasury has helped keep them undercapitalized, analysts say, and a
severe downturn in the housing market could eventually lead them to
require further bailouts.
The Obama administration has argued for replacing Fannie Mae and
Freddie Mac with a new entity, but lawmakers appears unlikely to
address housing reform until at least after congressional elections
in November - and any reform effort would likely be a multi-year
task.
Republicans want to see less government support of mortgages, while
some Democrats argue low-income borrowers should get more support.
Private shareholders in Fannie Mae and Freddie Mac have sued the
government over the dividend policy, claiming Washington is
expropriating the value of their preferred shares.
The litigation, currently in pre-trial phases, is expected to drag
on for years.
(Reporting by Jason Lange; Editing by Andrea Ricci)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright
2014 Reuters. All rights reserved. This material may not be
published, broadcast, rewritten or redistributed. |
