And US taxpayers will have to pay for it.
Freddie Mac and Fannie Mae, the mortgage-finance companies operating under U.S. conservatorship, requested another $3.1 billion in Treasury Department aid as they reported quarterly earnings reflecting improving health.
Fannie Mae reported net income of $73 million for the three-month period that ended Dec. 31, the Washington-based company’s first positive results in three years. McLean, Virginia-based Freddie Mac’s quarterly loss narrowed to $113 million from $6.5 billion in the same period a year earlier.
Both companies reported net-worth deficits attributable largely to the quarterly dividend payments they make to the Treasury Department, which has owned more than 79 percent of both companies since they were seized and placed under U.S. conservatorship during the credit crisis in 2008.
The government-sponsored enterprises, which own or guarantee more than half of U.S. mortgages, have been sustained by $154 billion in Treasury funds since the takeover. More than $20 billion of that money has been paid back to taxpayers in the form of a 10 percent dividend on the shares owned by Treasury.
The Treasury yesterday released an accounting showing that the companies’ cost to taxpayers is declining as their dividend payments grow. The two companies paid a combined $3.8 billion in the fourth quarter, reducing the net cost to taxpayers to $133.7 billion, The Treasury said.
Freddie Mac reported a net-worth deficit of $401 million in its fourth-quarter filing with the Securities and Exchange Commission, attributing it partly to the $1.6 billion dividend payment owed to Treasury. The company requested $500 million to eliminate that deficit.
Fannie Mae sought $2.6 billion from Treasury to help eliminate its $2.5 billion net-worth deficit. Like smaller rival Freddie Mac, the firm cited the dividend obligation — $2.2 billion in Fannie Mae’s case — as part of the reason for the shortfall.
A 2012 budget estimates predicted that taxpayer aid to Fannie Mae and Freddie Mac could total $224 billion by the end of 2012, of which $55 billion will be returned in dividends.
Washington policy makers are working on a plan to wind down the companies and rebuild the U.S. housing system.
By Lorraine Woellert – Feb 25, 2011 6:01 AM GMT+0100