Fannie Mae Bailout Seen Profitable by 2023 in Obama Budget

Fannie Mae and Freddie Mac, the U.S.-owned mortgage-finance companies, could return billions of dollars in profits to taxpayers who bailed them out in 2008, White House budget analysts said today.

Payments to the Treasury Department by Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac through fiscal year 2023 are projected to exceed by $51 billion the U.S. aid they have received under federal conservatorship, according to President Barack Obama’s spending plan released today. Last year’s budget saw a $28 billion loss through 2022.

The companies’ return to profitability while they’re still not technically on the government’s balance sheet raises pressure to resolve their future, said Tim Rood, a partner in the Collingwood Group LLC, a Washington-based financial services consulting firm.

“It begs the question of whether some sort of public-private partnership wouldn’t be a reasonable solution,” Rood said in a telephone interview.

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.

Since they were seized by regulators amid soaring losses in 2008, the two companies have drawn $187.5 billion from Treasury and have sent back $65.2 billion in dividends, which count as a return on the government’s investment and not as a repayment.

Steady Profits

The companies have begun reporting steady profits as home prices have been rising. Fannie Mae reported net income of $17.2 billion for 2012, outpacing profits at S&P 500 companies such as Wal-Mart Stores Inc., General Electric Co. and Berkshire Hathaway Inc., according to data compiled by Bloomberg. The company reported a $16.9 billion loss in 2011.

Freddie Mac reported in February that it earned $11 billion in 2012, compared with a loss of $5.3 billion in 2011.

Under the terms of an agreement with Treasury that went into effect this year, the enterprises will be allowed to retain only $3 billion in net worth. Any profits beyond that amount will go to taxpayers.