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Fannie Mae to Pay Treasury $10.2 Billion as Home Prices Rise

Fannie Mae to Pay Treasury $10.2 Billion as Housing Prices Rise
After its latest payment, Washington-based Fannie Mae will have sent the Treasury a total of $105 billion, compared with the $117.1 billion of aid the company has received. Photographer: Andrew Harrer/Bloomberg

Fannie Mae, the mortgage financier seized by U.S. regulators in 2008, will pay the Treasury Department $10.2 billion after reporting a sixth consecutive quarterly profit on continued recovery in the housing market.

The government-sponsored enterprise, which is operating under federal conservatorship, had net income of $10.1 billion for the three-month period that ended June 30, according to a statement released today. The company’s net worth was $13.2 billion, it said in the statement.

“We had continued stable revenues and our results were boosted by a significant increase in home prices, 4.1 percent for the quarter,” Fannie Mae President and Chief Executive Officer Timothy J. Mayopoulos said on a call with reporters.

After its latest payment, the Washington-based company will have sent the Treasury a total of $105 billion, compared with the $117.1 billion of aid the company has received. Freddie Mac of McLean, Virginia, which yesterday reported a $5 billion quarterly profit, will have paid about $41 billion after drawing $72 billion.

Fannie Mae yesterday joined a group of investors who authorized Wells Fargo & Co. and Deutsche Bank AG to seek a court order blocking the city of Richmond, California from seizing mortgages through eminent domain.

‘Serious Issue’

“We think this is a very serious issue and we believe the use of eminent domain that’s being proposed in Richmond is an inappropriate use of that power,” said Mayopoulos, whose company could suffer losses if loans in its retained portfolio are among those seized by municipalities to aid borrowers.

The Federal Housing Finance Agency, the U.S. regulator for Fannie Mae and Freddie Mac, said today it may direct the government-sponsored enterprises to stop doing business with cities that use the power of eminent domain for that purpose.

Fannie Mae and Freddie Mac were taken over by regulators in September 2008, shortly before the failure of Lehman Brothers Holdings Inc. and the rescue of American International Group Inc., amid losses that pushed them toward collapse. The companies have returned to profitability as the housing market recovered and they raised fees for loan guarantees.

Net income at Fannie Mae last year exceeded that of companies such as Wal-Mart Stores Inc., General Electric Co. and Berkshire Hathaway Inc., according to data compiled by Bloomberg. Starting this year, the terms of the U.S.-owned companies’ obligation to the government were changed so that they now return to Treasury all profits above a permitted capital reserve and the money isn’t counted as repayment.

Guaranteed Payments

Fannie Mae and Freddie Mac, which were created by the federal government before becoming publicly traded companies, buy mortgages from lenders and package them into securities on which they guarantee payments of principal and interest.

Fannie Mae has provided $3.7 trillion in liquidity to the mortgage market since 2009, the company said in the statement.

President Barack Obama on Aug. 6 called for the two companies to be replaced with a government mortgage reinsurer that would sustain losses only in catastrophic circumstances.

Hedge funds including Paulson & Co. Inc. have been pushing Congress to abandon plans to liquidate the companies as they buy up preferred stock that has been soaring after being considered worthless, according to people with knowledge of the discussions. Some owners of preferred shares have sued the U.S. government, charging that some of the companies’ profits should eventually go to stockholders.

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