Fannie and Freddie are raking in enormous profits

The mortgage heavyweights are continuing to return cash to taxpayers, buoyed partly by the recovering housing market.

By MSN Money Partner Nov 7, 2013 1:33PM

The Freddie Mac headquarters complex in McLean Virginia near Washington DC. © K. L. Howard/AlamyFox BusinessBy Matt Egan

 

Government-run mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC) revealed on Thursday they hauled in hefty combined third-quarter profits of $39.2 billion thanks to the improving housing market and accounting measures.

 

The announcement means the mortgage heavyweights, which were taken over by the government as the housing market cratered in 2008, can continue to return cash to taxpayers. Fannie Mae is the largest provider of U.S. residential mortgage funding.

 

The absence of enormous cash injections and emergence of hefty cash dividends from both Fannie and Freddie has helped fuel the shrinking U.S. deficit in recent quarters. In fact, Freddie Mac's big profits bring its total dividends to the government up to the level of cumulative cash draws.

 

Freddie Mac posted net income of $30.5 billion during the third quarter, including the $23.9 billion impact of releasing the valuation allowance on deferred tax assets. The year before, the company earned $5 billion.

 

On a pre-tax income basis, Freddie said it earned $6.5 billion, up from $4.9 billion the year prior.

 

Freddie Mac cited higher non-interest income thanks to gains on its mortgage-related investment portfolio, gains on multifamily mortgage loans and settlement proceeds.

 

The company also said the "strong" rise in home prices has boosted results, but warned it expects home-price growth to "moderate in future periods," making its recent level of earnings unsustainable.

 

Still, Freddie Mac said it will pay the U.S. Treasury Department $30.4 billion in December 2013, raising its total dividend payouts to $71.35 billion, compared with cumulative cash draws of $71.34 billion. The government still holds $72.3 billion of senior preferred stock.

 

Marking its seventh consecutive quarterly profit, Fannie Mae said it earned $8.7 billion in the third quarter, up from just $1.8 billion the year before.

 

Management cited higher credit-related income thanks to rising home prices, which cut its loss reserves, as well as a decline in the number of delinquent loans and compensatory fees from Bank of America (BAC).

 

Fannie said it will pay taxpayers $8.6 billion in dividends in December, raising its total dividend payout to the U.S. Treasury Department to $114 billion. The company, which hasn't needed an influx of cash since the first quarter of 2012, noted the U.S. still holds $117.1 billion of senior preferred stock.

 

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20Comments
Nov 7, 2013 2:54PM
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I have been Posting on this for months now while most the Mainstream Media has not. Fannie and Freddie Exposure to Sub-prime, less than $300Billion. Fannie and Freddie Government loan Size, $187Billion. Amount money repaid to date, $146Billion. Amount paid back by DEC2013, $185Billion. Meanwhile, certain groups are still trying to blame Fannie and Freddie for the Financial Crisis while giving a Free Pass to all the Money Changers. You know who you are.

The Title says it all, Fannie and Freddie are raking in the Profits, meanwhile the so-called Liberal Media is only talking about the Failures of the ACA. We aren't hearing about the Failure to pay a Living WAGE. We aren't hearing about Record Pay for CEOs and Record Cash Hoards, but we keep hearing about some Bogus Regulations which are not holding them back. Power corrupts and absolute power corrupts absolutely.

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To big to fail, to big to jail, and the twerp Obama hires to investigate quits and goes to work for the very crooks he was supposed to prosecute. I love the American govt. Don't you? Im glad im wealthy so that I can watch all you peasants  cry instead of  revolt. I don't often need subsidized to further enrich myself, but when I do, I visit D.C..  Stay thirsty my friends

Nov 7, 2013 2:23PM
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Wonder how the deficit will balloon after Fannie and Freddie pay back the loans.  Also wonder about he impact of Obama Care on the deficit?
Nov 7, 2013 3:35PM
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This has to be without question BS, these places have never made a profit....Gov. management always stole the money from these businesses and wasted.....I am sure it hasn't accounted for past few years of losses either. Why do we get these type of lies from governmental reporting?
Nov 7, 2013 3:17PM
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i though the feds were investing 85 billion a month into  bonds and  montages  so exactly  where is  fanny and freddie  getting the money  ???  or is the QE the source of there profit
Nov 7, 2013 6:16PM
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Let's see, they can figure out that Fannie and Freddie are making huge, albeit, probably imaginary profits; and, the White House can tell us how much money it cost American's for the government shutdown, but they can't figure out that Obamacare isn't going to work?  Folks, I think I smell the smoke of diversion here.  Me thinks the next thing we will see is the mirrors!!!  They're spinning hype again to take our attention away from the real issue(s)!!!
Nov 7, 2013 5:36PM
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So where's my cut??? I'm a taxpayer. The government used my money without my permission. When do I get reimbursed? When do the rest of the American citizens get reimbursed?
Nov 7, 2013 3:55PM
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I have to wonder if that payment that Fannie turns in will be used to (dare I say) pay down some of the debt?  The way DC spends money it will begone in a day.

 

Nov 7, 2013 4:58PM
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Some people still don't understand you can hold a ton of something yet it's only a much smaller percentage of your entire BOOK. Some people still haven't looked at the Total Home Mortgage Market, then and now. Some people still haven't looked at the total amount of folks paying their Mortgage, the vast Majority, and those that were not. Some people still can figure out basic Math, and they never will. In other words, they

Absolute, outright LIE..............................

Nov 7, 2013 7:25PM
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....STOP the 85 Billion per month of quantitative easing - enough already!!!!
Nov 7, 2013 6:52PM
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I am a taxpayer....I HAVEN'T received a dime.  They will just funnel the money somewhere else to spend....like they have the Social Security taxes we have paid and sent  for generations but are told over and over, that they might not be there for future generations.
Nov 7, 2013 6:56PM
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So the gov. wants to give the business to the Too Big To Fail guys? How will the gov. be compensated for all of that $$$$$? Who profits? Not the share holders, not the taxpayers. SURPRISE! The big banks.
Nov 7, 2013 8:20PM
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I'm with you, "Iwant2beAclone"........."Where's OUR cut?!?!
Nov 8, 2013 4:52PM
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Hmm 40 billion of the 85 billion a month is used to buy up all the loans securitized  from these giants.  If they keep going at 40 billion, they will soon be buyin all the volume since housing is slowing down hard.

Don't be fooled, yeah the housing recovery helped but the real reason is the QEIII asset purchasing program, which is really what allowed for record low mortgage rates.

Nov 7, 2013 7:19PM
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I wondered who was going to benefit when they refused to do anything, and I lost my house. Now I see the light at the end of the tunnel....but could it be an oncoming train?  
Nov 7, 2013 2:44PM
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To think the Republicans want to close them down....
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