Rising home prices, low mortgage rates and increased refinance activity helped boost mortgage company Fannie Mae to a record annual profit in 2012.
The $17.2 billion profit is the company's first since 2006. Fannie's rival, Freddie Mac, posted record earnings in 2012 of $11 billion.
In 2008, Fannie Mae and Freddie Mac, which together guarantee two-thirds of home mortgages, were bailed out by U.S. taxpayers and put under the governance of the Federal Housing Finance Agency. During the height of the housing bust, the two companies were bleeding money: From 2007 to 2011, they lost $166.6 billion in 17 of 18 quarters.
Rising home prices mean Fannie and Freddie are recouping more from foreclosed properties. In addition, stricter lending standards mean that fewer borrowers are at risk of defaulting on their mortgage. Greg McBride, senior financial analyst for Bankrate.com, says that over time, the improvements will translate into good news for investors and borrowers. "Longer-term, if Fannie and Freddie are profitable, the buyback risk to lenders diminishes, which will increase willingness to lend," he says. "But again, that's a longer-term development."
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