As mortgage-finance giants Fannie Mae and Freddie Mac start to reimburse taxpayers, the government’s tab for bailing them out has adjusted down.
As the government’s tab for bailing them out has adjusted down, Mortgage finance giants Fannie Mae and Freddie Mac start to reimburse taxpayers.
According to the Federal Housing Finance Agency (FHFA), the projected cost for rescuing the companies is lower by some $30 billion through 2014 – from last year’s estimate of $154 billion.
Over $140 billion have been paid by taxpayers to bailout the
companies, but that amount will start to decline as the firms suffer smaller losses, which will enable them to pay back more. Be that as it may, it’s not likely that the government will ever be fully reimbursed.
Fannie and Freddie must pay annual dividend payments to the Treasury of ten percent – to exclude money borrowed from the Treasury to pay the dividends.
Data show that the firms are stabilizing; however, they are not likely to return to profitability any time soon. This is because dividend payments will eliminate any profit potential. All indications are that the two firms won’t be able to earn their way out of government ownership.
Fannie Mae has received over $100 billion from the Treasury, in addition to another $15 billion it borrowed to pay back the government. The firm must now pay more to the Treasury each year than it ever even earned during the housing boom – more than $10 billion. Freddie Mac, on the other hand, has actually returned more than it has taken in the last year, and could pay back $15 billion through 2014.
Mortgages, nationwide, are at over $10 trillion. Fannie and Freddie own or guarantee about half of that. Losses resulted mostly from those bought or guaranteed between 2005 and 2008. Since then, the firms have become more stringent with underwriting standards, and loans are expected to be more profitable.