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Fannie-Freddie payback could top bailout soon
NEW YORK (2/12/14)--Fannie Mae and Freddie Mac may report earnings later this month that will result in the mortgage financing giants paying the U.S. Treasury more than the $187 billion in government bailouts they received starting in 2008 (CNNMoney Feb. 10).

As a result of a recovering housing market and a significant one-time gain sparked by accounting rules, Fannie and Freddie paid a combined $130 billion to taxpayers last year alone.  That was after paying only $55 billion for the four years from 2008 through 2012.

Barring another sharp economic downturn--or the demise of the two government-sponsored housing enterprises--Fannie and Freddie are likely to continuing paying billions to Treasury, though not at the 2013 rate.

If the government hadn't changed the repayment rules at the beginning of last year--with Fannie and Freddie turning over most of their profits to the government each quarter--it would likely have been another six years before taxpayers recouped the government funds expended on keeping the GSEs going.

CNNMoney notes, however, that not everyone is happy about the accelerated payback to taxpayers.

A hedge fund has filed a lawsuit arguing that the bigger repayments are in violation of the law and that if profits are being returned to taxpayers, then the government should give up some of its 80% of shares in return--thereby increasing the value of private investor-held shares.

A second suit, filed by low-income housing groups, charges that the original bailout law also demands that some of future Fannie and Freddie profits go into a government trust fund to provide affordable housing to the country's low-income and homeless populations.


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