21 July 2019

Mortgage Bailout Now Profitable For Taxpayers

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Fannie Mae and Freddie Mac have repaid all of the $187 billion they received in the 2008 mortgage bailout during the financial crisis. Fannie Mae reported Friday it will pay Treasury an additional $7 billion in profit from the end of last year to complete the payback.

Beginning in late 2008, the federal government bailed out the two firms that had become nearly the only source of loans for American home owners. With the payment announced Friday, the payments from the two firms now comes to $192 billion.

Fannie's fourth-quarter profit caps its most profitable year on record, earning $84 billion during 2013. A combination of a housing market recovery, with a drop in foreclosures, rising home prices and a rebound in home sales all helped to improve the company's bottom line.

The bursting of the housing bubble in 2006 and the jump in foreclosures that followed caused massive losses for Fannie and Freddie, each of which buys home loans from lenders, bundles them up, and sells them to investors with a guarantee the loans will be repaid.

Through 2012, they were each paying the U.S. Treasury a dividend. Starting in 2013, the government started essentially collecting all of each firm's profits. The payments to taxpayers are treated as dividends and will continue for now.

The only things that could stop the payments would be a new housing downturn that plunges Fannie and Freddie back into red ink; passage of one of the legislative proposals to phase out the two firms; or a successful legal challenge to the current payment system.

Freddie has already made dividend payments essentially matching the $71.3 billion it received in the bailout. It is due to report results next week, and is expected to post additional profit and payments to Treasury.

Click here for more from CNNMoney.  
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