They may be in federal conservatorship, but a funny thing is happening to the two “troubled” mortgage giants, Fannie Mae and Freddie Mac: They are making tons of money.
It’s enough to give federal bailouts a good name.
With double-digit home price appreciation and more buyers coming off the sidelines, there have been fewer defaults and more revenues on GSE (government sponsored enterprises) loan guarantees. That’s translated into a handsome $17.2 billion profit in 2012 for Fannie Mae, while its twin, Freddie Mac, posted gains of $11 billion.
With these eye popping numbers, the game has changed. With profits expected to continue and even rise for the foreseeable future, it is now likely that the $180 billion in taxpayer funds used to bail out the GSEs will be paid back in the next few years. It also puts additional pressure on Congress to figure out the government’s future role in housing, specifically as it relates to the GSEs.
But high-level conversations in Washington, D.C. about reforming (or replacing) the GSEs often center around financing challenges for single-family housing, overlooking the crucial role GSEs have played in commercial real estate lending.
