New York: US mortgage finance giants Freddie Mac and Fannie Mae Thursday said they will pay the US Treasury USD 39 billion in dividends after reporting strong third-quarter earnings.
Freddie Mac will pay the Treasury USD 30.4 billion, while Fannie Mae will pay USD 8.6 billion. The latest payments take the two quasi-public bodies closer to effectively making US taxpayers whole after they received an infusion of government cash following the housing bust.
After the latest payments, the two bodies will have paid the government USD 185.2 billion, compared with the USD 187.4 billion pumped into them after the housing bust.
However, both companies remain under US "conservatorship," with the US Treasury maintaining control through its preferred stock in both companies.
Officially the dividends paid do not count against the funds deployed by the Treasury to purchase the preferred shares to support the companies.
Lawmakers in Congress meanwhile have been debating how to restructure the firms now that they are profitable again, with some wanting to wind them down, to get the government out of the mortgage finance business.
Both firms have benefited from the improving housing market, which has led to higher home prices and fewer foreclosures, requiring smaller loan-loss reserves.
Freddie reported net income of USD 30.5 billion for the third quarter, up from USD 2.9 billion in the year-ago period.
Freddie`s earnings were bolstered by a USD 24 billion tax allowance and by USD 900 million in settlements with Wells Fargo, Citigroup and SunTrust Mortgage relating to loans sold by the banks to Freddie that Freddie said did not meet standards.
"Freddie Mac`s level of earnings in recent periods is not sustainable over the long term," the company said in a news release.
"Freddie Mac`s recent financial results have benefited significantly from strong home-price appreciation and the company expects home-price growth to moderate in future periods."
Fannie reported net income of USD 8.7 billion compared with USD 1.8 billion in the year-ago period.
"Fannie Mae expects to remain profitable for the foreseeable future," the company said, adding that earnings may "vary significantly" from quarter to quarter "due to many factors, such as changes in interest rates or home prices."
First Published: Friday, November 8, 2013, 10:05