Certified Forensic Loan Auditors, LLC

  Upcoming Classes

Search CFLA's Article Archive:

Freddie Mac Profit Moves U.S. Housing Bailout further into Black

generalholding.co | February 27, 2014

By Margaret Chadbourn

WASHINGTON (GENERAL HOLDING LLC) – Freddie Mac said on Thursday it will soon send the U.S. Treasury a $10.4 billion dividend after posting a ninth straight quarterly profit, putting taxpayers further into the black on their bailout of the mortgage giant.

When it makes the payment next month, Freddie Mac will have paid about $81.8 billion in dividends in return for the $71.3 billion in support it received from the Treasury when it was bailed out during the financial crisis.

The nation’s second-largest mortgage finance company earned a net income of $8.6 billion in the three months ended December 31, paving the way for the payment. The income brought earnings for 2013 to $48.7 billion, its highest ever annual profit. It had net income of $11.0 billion a year earlier.

Freddie Mac and sibling company Fannie Mae have operated under federal conservatorship since 2008.

The duo, which had been teetering on the brink of insolvency, must now turn over any profits to the Treasury as dividends on the controlling stake the government took when it bailed them out. They cannot repurchase the government’s share.

Last week, Fannie Mae reported record annual earnings and said it would ship $7.2 billion to the Treasury, putting taxpayers ahead on its bailout for the first time. Freddie Mac had broken even in the prior quarter.

When they make their latest dividend payments, taxpayers will have received about $202.9 billion for their support, compared to the $187.5 billion provided in bailout funds.

The companies, which own or guarantee 60 percent of all U.S. home loans, have been helped by a housing recovery that has lifted prices and kept a lid on defaults. Their return to profitability also allowed them to reverse write-downs of certain tax-related assets, leading to large one-time windfalls.

“The year and quarter were extremely strong,” Donald Layton, Freddie Mac’s chief executive officer, said on a call with reporters. “These levels of income are not sustainable,” he cautioned.

No one expected the two companies to become profitable again so quickly, but when home prices surged in 2012, they were able to recover more money than expected on soured loans.

The sizable dividend payments have complicated a debate on the companies’ future.

To avoid ever having a taxpayer-rescue again, the Obama administration and lawmakers on Capitol Hill have vowed to wind them down and revamp the housing finance system.

The Senate is working on a bipartisan bill that would ensure a government backstop for the market remains in place in times of crisis, an approach favored by the White House. A Republican-backed bill in the U.S. House of Representatives would limit federal mortgage guarantees more sharply.

The companies don’t make loans but instead buy them from lenders and package them into securities they sell to investors. In doing so, they provide a steady source of mortgage funds.

Investors including Perry Capital and Fairholme Funds have sued the government, challenging the bailout terms that force all quarterly profits from Fannie Mae and Freddie Mac to be swept into the Treasury’s coffer. A federal judge said on Thursday that Fairholme’s case could move forward to the discovery phase.

Separately, housing and consumer advocates have filed lawsuits arguing that some of the profits should go into an affordable housing trust set up just before the crisis.

The litigation is expected to drag on for years, as is the congressional effort to remake the housing finance system.


Back to February 2014 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

SEE BELOW- http://www.certifiedforensicloanauditors.com

Call us toll free at 888-758-2352

Bookmark and Share
Facebook Like us on Facebook
Twitter Follow us on Twitter
YouTube View our YouTube Videos
LinkedIn Connect to us on Linkedin
BBB Logo


Contact us or view our Sample Documents & Audits by completing the form below.

International Bloomberg Securitization Audits


DVD Sets Only $99


FREE Mortgage Fraud Analysis


Order Cutting-Edge Services Now


Quiet Title Packages from Licensed Attorneys


Affiliate Services


CFLA Sponsored Attorney Links


Take-Home Education Package