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Freddie Mac profits push dividend return close to bailout funds

  • Article by: CLEA BENSOn
  • Bloomberg News
  • November 7, 2013 - 7:32 PM

Freddie Mac and Fannie Mae will return $39 billion to the U.S Treasury after reporting third-quarter profits, bringing their total payments to within about $2 billion of the cash aid they got after the credit crisis.

The mortgage-finance companies, which were sustained by $187.5 billion in taxpayer money after they were placed under federal conservatorship in 2008, will make dividend payments by next month to boost their total returns to $185.2 billion, they said in separate filings Thursday.

“We are quickly approaching the point where taxpayers will receive a positive return on their investment in this company,” Fannie Mae Chief Executive Timothy Mayopoulos said on a conference call with reporters. “That’s obviously very good news for taxpayers.”

Under terms of their conservatorship, the government since last year has been taking all of the companies’ quarterly profits beyond a $3 billion net-worth cap. The money counts as a return on the U.S. investment and not as a repayment of the aid, leaving Fannie Mae and Freddie Mac without an avenue for exiting conservatorship.

Freddie Mac alone will pay $30.4 billion after reporting net income of $30.5 billion for the three-month period that ended Sept. 30, according to its statement. The McLean, Va.-based company’s results were driven by a decision to reverse write-downs on $23.9 billion in tax credits, valuable now that it has returned to profitability.

The company has taken $71.336 billion in aid from Treasury and will have returned $71.345 billion, leaving taxpayers $9 million ahead, according to a statement.

Donald Layton, Freddie Mac’s chief executive, cautioned against interpreting the results as an indicator of future profits.

“It’s a reflection of the housing cycle coming back,” Layton said on a call with reporters. “I would not ever characterize the next few years as ones in which there would be steady earnings necessarily, or in any way promise steady earnings.”

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