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Freddie Mac, Fannie Mae to pay US $39 bn

Freddie Mac headquarters is seen April 22, 2009 in McLean, Virginia
Freddie Mac headquarters is seen April 22, 2009 in McLean, Virginia

US mortgage finance giants Freddie Mac and Fannie Mae Thursday said they will pay the US Treasury $39 billion in dividends after reporting strong third-quarter earnings.

Freddie Mac will pay the Treasury $30.4 billion, while Fannie Mae will pay $8.6 billion. The latest payments take the two quasi-public bodies closer to effectively making US taxpayers whole after they received an infusion of government cash following the housing bust.

After the latest payments, the two bodies will have paid the government $185.2 billion, compared with the $187.4 billion pumped into them after the housing bust.

However, both companies remain under US "conservatorship," with the US Treasury maintaining control through its preferred stock in both companies.

Officially the dividends paid do not count against the funds deployed by the Treasury to purchase the preferred shares to support the companies.

Lawmakers in Congress meanwhile have been debating how to restructure the firms now that they are profitable again, with some wanting to wind them down, to get the government out of the mortgage finance business.

Both firms have benefited from the improving housing market, which has led to higher home prices and fewer foreclosures, requiring smaller loan-loss reserves.

Freddie reported net income of $30.5 billion for the third quarter, up from $2.9 billion in the year-ago period.

Freddie's earnings were bolstered by a $24 billion tax allowance and by $900 million in settlements with Wells Fargo, Citigroup and SunTrust Mortgage relating to loans sold by the banks to Freddie that Freddie said did not meet standards.

"Freddie Mac's level of earnings in recent periods is not sustainable over the long term," the company said in a news release.

"Freddie Mac's recent financial results have benefited significantly from strong home-price appreciation and the company expects home-price growth to moderate in future periods."

Fannie reported net income of $8.7 billion compared with $1.8 billion in the year-ago period.

"Fannie Mae expects to remain profitable for the foreseeable future," the company said, adding that earnings may "vary significantly" from quarter to quarter "due to many factors, such as changes in interest rates or home prices."

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