Fannie Mae Payments to U.S. Will Exceed Bailout
Fannie Mae will pay the Treasury Department $7.2 billion after posting an eighth straight quarterly profit, pushing total dividend payments above the $116.1 billion of aid it received after the financial crisis.
The mortgage-finance company, which is operating under federal conservatorship, had net income of $6.5 billion for the three months ended Dec. 31, Washington-based Fannie Mae (FNMA) said today in a regulatory filing. That brought earnings for 2013 to $84 billion, the highest ever for the 80-year-old firm.
“Obviously, it’s good news for taxpayers that Fannie Mae is profitable,” Chief Executive Officer Timothy J. Mayopoulos said on a call with reporters. “I don’t think our profitability should be interpreted as a reason for delaying housing-finance reform.”
Fannie Mae and Freddie Mac (FMCC) were seized by regulators in September 2008, just before the failure of Lehman Brothers Holdings Inc., amid losses that pushed them toward collapse. The companies, which provide liquidity to the mortgage market by buying loans and packaging them into guaranteed securities, have returned to profitability as the housing market recovered and they raised fees.
After its latest dividend payment, Fannie Mae will have sent the Treasury a total of $121.1 billion. The company also counts an additional $1 billion in senior preferred stock the Treasury obtained in 2008 as part of its aid package.
Fourth-quarter profit compared with $7.6 billion in the same period of 2012.
The payments to Treasury, which include all of the company’s quarterly profits, count as a return on the U.S. investment and not as a repayment of the taxpayer aid. Currently, there is no mechanism for Fannie Mae to exit government control.
“For the last five years, the employees of Fannie Mae have come to work with the goal of reaching this accomplishment for the taxpayers,” said Mayopoulos, 54. “I’m very proud of what our employees have achieved and I’m very, very happy for the taxpayers.”
The firms’ reversals of fortune have complicated the debate over their future as lawmakers in both houses of Congress work on measures to wind them down.
Stakeholders including Perry Capital LLC and Fairholme Funds Inc. have sued the U.S., challenging the arrangement under which the government takes all quarterly profits from Fannie Mae and Freddie Mac. The lawsuits claim that Treasury is expropriating the value of its investors’ preferred shares.
Fannie Mae’s 8.25 percent preferred shares gained 2.8 percent to $10.52, the highest since the company’s bailout, as of 10:15 a.m. in New York. The notes, which have a par value of $25 and suspended dividends, are up from $1.67 at the start of last year.
The company’s new regulator, former Democratic congressman Melvin L. Watt, took over as director of the Federal Housing Finance Agency in January. Watt, who has the power to set policy governing the company’s operations, hasn’t yet announced his priorities, Mayopoulos said.
“What he has told us is we should continue to do all the good work we have been doing unless he tells us otherwise,” Mayopoulos said.
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