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Fannie, Freddie payments rev up

By Judy Martel · Bankrate.com
Tuesday, August 21, 2012
Posted: 8 am ET

Fannie Mae and Freddie Mac will accelerate their repayment to taxpayers for the 2008 bailout, according to a change in the government's rescue plan.

The Treasury Department announced that instead of the required 10 percent annual dividend payment, it will take all profits posted each quarter. When there are no profits in any given quarter, payment will not be required. In the past, when Fannie and Freddie fell short, they had to borrow from the government to make the required dividend payment.

The revised plan comes as Fannie Mae and Freddie Mac post record profits. So far this year, Fannie Mae has posted a first-quarter profit of $2.7 billion and a second-quarter profit of $5.1 billion. Freddie Mac's profits were $577 million in the first quarter and $3 billion in the second quarter. The surpluses were due to recovering home prices and a reduction in loan-loss reserves.

By not requiring the dividend payments, Congress aims to dissolve the two mortgage companies sooner. In the original bailout plan, the Treasury Department was given shares of stock that promised the 10 percent dividend. Because of the dividend, the fear is that investors will perceive the two companies as private.

Taxpayers have invested close to $188 billion total in propping up Fannie and Freddie, and since 2008, the mortgage giants have paid back $46 billion in dividend payments.

Keep up with your wealth and mortgages, and follow me on on Twitter @JudyMartel.

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