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Fannie, Freddie profits surprise

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By Reuters
Monday, March 10, 2014, 8:30 p.m.

WASHINGTON — Government-owned mortgage financiers Fannie Mae and Freddie Mac could send about $179.2 billion in profits to taxpayers during the next 10 years if the terms of their bailout remain intact, the White House budget office said on Monday.

The amount is more than triple the estimated 10-year payments calculated last year in the White House budget proposal, driven by the companies' increased profitability.

Fannie Mae and Freddie Mac have operated under federal conservatorship since 2008, when regulators agreed to inject capital into the companies to keep them afloat.

They received $187.5 billion in taxpayer funds, but they have returned to profitability, and by the end of March, they will have had paid $202.9 billion in dividends to the U.S. Treasury.

No one expected them 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 profit projections were made in an addendum to President Obama's fiscal 2015 budget proposal. In a budget proposal last year, the administration estimated that Fannie Mae and Freddie Mac would send the Treasury $51 billion through 2023.

Under a 2012 revamp of their bailout terms, Fannie Mae and Freddie Mac send a majority of their profits to the Treasury as dividends, and they are unable to repurchase the controlling share the government took when it bailed them out. Previously, they were required to pay only a 10 percent dividend on their bailout funds in profitable quarters.

Shareholders, including Perry Capital and Fairholme Capital Management, have sued the United States over the changes. They argue that since the companies are returning profits to taxpayers, the government's stake should shrink.

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