The nation’s biggest mortgage finance company, Fannie Mae, said it will pay $59.4 billion in dividends to the US Treasury today. The Company recorded record breaking profits in the first quarter that reflected a multi-billion dollar tax-related gain.
In the first quarter, Fannie Mae reported a pretax income of $8.1 billion and booked an additional gain of $50.6 billion by reversing a write-down on certain tax assets, which resulted in a new income of $58.7 billion. This is impressive compared to a $2.7 billion profit in the quarter prior. Fannie Mae has turned a profit for five straight quarters.
Fannie Mae and its sibling company Freddie Mac were seized by government regulators in September 2008. Since then the Company has received a staggering $116.1 billion in taxpayer funds. By the end of June, the Company will have paid $95 billion in dividends to the US Treasury.
The massive payment to the US Treasury will reduce the net cost of Fannie Mae’s taxpayer bailout to $21.1 billion. Fannie Mae and Freddie Mac own or guarantee about half of all U.S. home loans.
Read related content:
"We weigh a complex set of factors in this evaluation," Fannie Mae Chief Executive Office Timothy Mayopoulos told reporters on a conference call. "We determined that the factors in favor of releasing the valuation allowance outweighed the factors in favor of maintaining it."
Fannie Mae’s sibling company Freddie Mac has also seen a return in profitability and is in the process of deciding whether to realize $30.1 billion in deferred assets. Freddie Mac has received around $71 billion in taxpayer aid and has to pay $36.6 billion by the end of June, leaving the net cost of its bailout at $34.7 billion.
The bailout for the two Companies has specific terms that do not allow them to buy back the government’s stake. That means that Fannie Mae and Freddie Mac will have to continue to make payments without being able to recover the loan amount.