Fannie Mae posts third-quarter profit, to pay government $8.6 billion

WASHINGTON -- Seized mortgage finance giant Fannie Mae posted its seventh-straight quarterly profit in the July-through-September period and will pay the government $8.6 billion in dividends, bringing it close to offsetting the cost of its 2008 bailout, the company said Thursday.

With the latest dividend payment, due by the end of the year, Fannie will have sent $114 billion to the Treasury Department. The company has received $116.1 billion in taxpayer money, though under terms of the complicated bailout the dividend payments do not reduce the amount owed to the government.

“We are quickly approaching the point when taxpayers will receive a positive return on their investment in this company,” Fannie Mae Chief Executive Tim Mayopoulos told reporters during a conference call. “That’s obviously very good news for taxpayers.”

Mayopoulos said he was confident Fannie ultimately would end up returning more in dividends to taxpayers than the amount of money they pumped into the company, and that actions the company has taken under government conservatorship “have righted the ship.”

Boosted by the housing market recovery, Fannie’s finances have rebounded in the last two years.

The company reported a record $17.2-billion annual profit in 2012 and on Thursday reported $8.7 billion in net income for the third quarter. The figure was down from a $10.2-billion profit in the second quarter.

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Although the housing recovery has slowed in recent months, Mayopoulos said he expected earnings to “stay strong” for the “foreseeable future.”

But he said Fannie does not expect home prices to continue to rise at the pace they have this year, and that that could cause the company’s earnings to “moderate.”

The federal government seized Fannie and its sibling firm, Freddie Mac, in 2008 to prevent their collapse amid escalating losses on bad mortgages from the subprime housing boom. The companies purchase and guarantee mortgages.

Since the seizure, the Treasury Department has pumped about $188 billion in taxpayer money into the two companies, which are under government conservatorship.

But as the housing market has recovered, so have the finances of Fannie and Freddie. Fannie has not received any government assistance since 2011, and Freddie has not received any since early 2012.

Freddie Mac is expected to report third-quarter earnings in the coming days.

The bailout requires the companies to pay dividends to the government. Since last year, the companies have been required to turn over all their quarterly profits to the Treasury.

The total paid is fast approaching the amount of the bailouts. As of Sept. 30, Fannie and Freddie had paid a combined $146 billion in dividends to the Treasury.

But the dividend payments do not reduce the amount of money owed to the government. That provision was designed to prevent Fannie and Freddie from emerging from the conservatorship and returning to private companies.

There is broad agreement among Democrats and Republicans that the companies should be dismantled, though there is no consensus on how their role in the mortgage finance system should be replaced.

[Updated, 11:05 a.m. PST Nov. 7: A previous version of this post stated that Fannie Mae had received $117.1 billion in bailout money. It received $116.1 billion.]

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