Due to the housing bubble burst in
2008, the federal government took ownership of the mortgage giants, Fannie Mae and Freddie Mac, and bailed them out of
financial ruin. Not only did this bailout cost $187.5 billion in taxpayer
dollars, but it also took years for Fannie Mae and Freddie Mac to recover from their
monumental losses and begin to profit again.
However, there is good news! Now
that the mortgage giants are profitable again, they have more than repaid the
government for their 2008 bailout by paying dividends to the U.S. Treasury of $192.5
billion. Fannie Mae alone
broke records with its $84 billion profit in 2013, completely exceeding the
government’s expectation of recovery.
Fannie Mae and Freddie Mac do not expect to make as huge
a profit in 2014 as they did in 2013, but they are hopeful that they will
remain profitable in the long run. The Obama Administration, however, still
wants to overhaul the mortgage giants and take away their monopoly on the
mortgage market. There is currently a bipartisan bill in the Senate called the Housing Finance Reform
and Taxpayer Protection Act of 2013 that focuses on financial reform and
will hopefully take center stage this year.
Brokers, keep in mind that the
housing market may drastically change in the next 5 years as private lending
replaces the government-sponsored enterprises. However, now that the mortgage
giants are turning such huge profits, reform may experience some delays. It is
difficult to enact reforms when times are good, even though another financial
crisis always looms on the horizon.
