Bailout less than expected
October, 2012
Fannie Mae and Freddie Mac could begin paying back money that was borrowed from taxpayers sooner than previously expected as a result of the improvements in the housing market.
A report was recently released by the Federal Housing Finance Agency, Fannie Mae and Freddie Mac's federal regulator, showing the two companies are estimated to pay between $32 billion and $78 billion to the U.S. Treasury through 2015, which is much earlier than expected.
Predictions have assumed that the companies would ultimately cost taxpayers $76 billion by the end of 2015, which is a large decrease from the current debt of $142 billion.
Last year, the government estimated that the debt would decrease to $124 billion by 2014 and the latest predictions are significantly better than those that were issued a year ago as a result of home prices showing better numbers, which has improved the mortgage-finance companies' bottom lines. The Obama Administration and FHFA in August remodeled the method used for the companies to repay their debts to the government.
The two companies will no longer pay a 10 percent dividend on the total money they have received from the U.S. Treasury, but will send their profits to the Treasury in quarters when they turn a profit. They also won't be required to pay dividends in periods where they report losses.
With home prices improving and more advancements being made in the housing market, more first-time home buyers might dive into putting a down payment on a home before prices continue to increase. The past couple years, the housing market has been tailored toward buyers who had great credit, as lenders became more strict on their standards and home prices continued to sink lower.
The housing market recently hit a new high in September, as construction started to increase significantly. Construction starts in the month were at an 872,000 annualized rate, which is a 15 percent month-over-month increase and a 35 percent increase year-over-year.
"As consumer confidence rises and jobs return, more local markets and more consumers will join the buyer market and I expect housing construction to continue a modest but fairly steady rise throughout 2013 and into 2014," said David Crowe, chief economist at the National Association of Home Builders in a blog post.
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