Fannie Mae is preparing to pay the U.S. Department of the Treasury $59.4 billion while Freddie Mac will pay the agency $7 billion after it reported its second highest ever quarterly net income, Bloomberg reported May 8.
Freddie and Fannie have operated under government conservatorship since 2008.
In a conference call with reporters, Freddie’s Chief Executive Officer Don Layton said the enterprise’s growing profits reflect the ongoing rebound of the housing market.
While Freddie’s $7 billion payment on a net income of $4.6 billion is straightforward, Fannie’s is somewhat controversial. Bloomberg reported that Fannie’s payment is the result of its decision to recognize deferred tax assets that have been on the company’s books since September 2008. That DTA allowance has been valued at $50.6 billion.
Fannie originally deferred recognition of the DTA in the fourth quarter, fearing it would reduce the company’s line of credit at the Treasury.
Fannie’s pretax first-quarter earnings were $8.1 billion, the largest in the company’s history.
Bloomberg reported that Freddie’s net worth at the end of the first quarter stood at $10 billion. The government-sponsored enterprise is required to pay the Treasury any income above $3 billion to refund the taxpayer aid it received in the wake of the financial crisis.
Freddie Mac and Fannie Mae have received a combined taxpayer bailout of around $190 billion since 2008. Both GSEs have since returned to profitability.
According to Bloomberg, U.S. home prices rose 9.3 percent in February from a year earlier, the largest increase since May 2006 based on data from the S&P/Case-Shiller index of property values.
As of 2013, the GSEs have stopped paying the Treasury 10 percent dividends, which have amounted to $65 billion, and instead will return any profits above and beyond a permitted capital reserve.
The White House has indicated that the GSEs payments to the Treasury through fiscal year 2023 will exceed the aid they have received from taxpayers by $51 billion.
While Congress has long hoped to wind down the GSEs, hedge funds have been asking lawmakers to abandon those plans because investors now are buying up preferred stock in the two.
Freddie Mac Senior Vice President David Lowman told Bloomberg that regardless of what lawmakers ultimately decide to do with the two GSEs, he expects Freddie and Fannie to continue to operate in some form for years to come and will continue to invest in systems and processes for long-term operations.