11 May 2013

Fannie Mae to repay further $US59.4b

6:54 am on 11 May 2013

US federal mortgage agency Fannie Mae is to pay $US59.4 billion in dividends to the US Treasury, after posting a record profit of $US58.7 billion in the first quarter.

The profit reflected a gain of $US50.6 billion from reversing an earlier writedown of tax benefits, compared to a profit of $US2.7 billion in the same period a year ago.

The BBC reports Fannie Mae and Freddie Mac had to be bailed out by the federal government at the height of the financial crisis in 2008.

During the crisis, Fannie received tax benefits on the bad loans it had to absorb and has now decided the time is right to capitalise on those.

With the latest dividend payment to the Treasury, Fannie will have repaid $US95 billion of the $US116 billion it has received from federal funds.

Freddie Mac is also profitable again. On Wednesday, it reported a profit of $US4.6 billion in the first quarter and said it would pay a dividend of $US7 billion to the Treasury.

With that, the agency will have repaid about $US37 billion of the $US71billion it had received.

Fannie and Freddie buy home loans, package them as bonds, guarantee them against default and sell them to investors.