Fannie Mae, Freddie Mac to Send Taxpayers $8.3 Billion This Quarter
The government-sponsored mortgage giants Fannie Mae and Freddie Mac said this week that they will send taxpayers $8.3 billion in second-quarter earnings, an increase of over 50%.
The corporations that support the mortgage market have benefited from the growing housing market, and both announced this week that rising interest rates had helped their profit lines.
Fannie Mae and Freddie Mac, both based in the District, have returned to profitability in recent years, and they are compelled to fork over their profits to the US Treasury under the terms of a government bailout that saved the companies during the Great Recession.
With their most recent dividend payments, the two companies will have paid taxpayers a total of $239 billion in dividends, much exceeding the $187 billion they earned during their bailouts.
Fannie Mae said on Thursday that it expects to be profitable “for the foreseeable future,” but warned that profits this year could be “significantly lower” than in 2014, when the company’s bottom line was inflated by litigation settlements related to defective mortgages.
Freddie Mac spokesperson Lisa Gagnon said the company hasn’t made any comparable predictions publicly.
In a statement, Fannie Mae CEO Timothy Mayopoulos said, “We reported another good quarter of financial performance with solid revenues and an impressive book of business that only continues to expand.”
The firms’ future is questionable, as they were created by the government decades ago to lubricate the mortgage market by buying home loans, selling bundles of them to investors, and guaranteeing their value. The Obama administration has stated that it wants to transfer that obligation to the private sector, but no plans have been authorized by Congress.
Last month, the Federal Housing Finance Agency, which oversees Fannie and Freddie, imposed looser regulations on their executives’ pay, bringing renewed scrutiny to the two businesses. Their chief executives might now make up to $4 million per year under the new rules, compared to $600,000 under the bailout terms.
This has enraged the White House and a bipartisan group of congressmen, who have submitted legislation to reinstate salary caps. One such proposal was advanced to the entire House of Representatives by the House Financial Services Committee last week.
The action was defended by the chairman of the Federal Housing Finance Agency, who stated that it was made to maintain top leadership. Freddie Mac CEO Donald Layton declined to comment on the situation when asked by reporters this week, stating that the company does not comment on matters of public policy.