CORRECTED-UPDATE 1-Fannie, Freddie to pay U.S. Treasury $4.7 bln in dividends by March


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NEW YORK (Reuters) – Fannie Mae and Freddie Mac said on Thursday they will pay a combined $4.7 billion in dividends to the U.S. Treasury Department by March as the housing finance agencies posted stronger annual 2018 net incomes than a year earlier.

FILE PHOTO: The Fannie Mae headquarters is seen in Washington November 7, 2013. REUTERS/Gary Cameron

In September 2008, the government took control of the two government-sponsored enterprises in a $187 billion bailout during the global credit crisis after they were exposed to soured subprime mortgages. The two agencies have handed over their profits to the U.S. Treasury under the terms of the conservatorship.

Fannie and Freddie make money by charging fees to guarantee home loans made by banks and other lenders. They also earn income from investing in mortgages and related securities.

Fannie and Freddie’s net results rebounded in 2018 after hefty writedowns on their tax-deferred assets as a result of the dramatic rewrite of the federal tax code enacted in December 2017. Lower corporate tax rates from the tax overhaul also helped their bottom line, they said.

On the other hand, the two agencies faced two major headwinds last year: a housing sector slowed by higher mortgage rates and tight inventories, and financial market turbulence in late 2018 due to investor worries about faltering global growth and the trade conflict between China and the United States.

Fannie, the larger of the two GSEs, reported net annual income of $16 billion in 2018, five times the $3.2 billion posted in 2017.

The company, headquartered in Washington, said it will send $3.2 billion in dividends to the Treasury by March 31.

Freddie said its net income was $9.24 billion, up from $5.63 billon in 2017.

The McLean, Virginia-based company said it will pay $1.5 billion in dividends to the Treasury by the end of next month.

Fannie and Freddie’s futures look somewhat uncertain as their regulator, the Federal Housing Finance Agency, awaits a permanent chief.

Mark Caldaria, who is currently the chief economist of U.S. Vice President Mike Pence, testified before the Senate Banking Committee earlier on Thursday in a confirmation hearing to succeed acting FHFB director Joseph Otting.

Caldaria had criticized the role of GSEs when he was at the Cato Institute.

White House officials have hinted about overhauling Fannie and Freddie including a possible end to their conservatorship.

(This story corrects spelling of name in paragraph 11 to Otting)

Reporting by Richard Leong; Editing by Chizu Nomiyama and James Dalgleish


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