With Fannie Mae and Freddie Mac both reporting record profits for 2012, taxpayers might be wondering if there's any reward for bailing out the agencies blamed for the housing bust – that is, besides saving the global financial system from imminent ruin.
According to Fannie Mae CEO Tim Mayopoulos, the government-sponsored enterprises aren't the only ones that will be rolling in the dough. In his first TV interview since the company reported a more than $17 billion profit for 2012, Mayopoulos told Bloomberg TV that U.S. taxpayers could actually see a net gain from the $116 billion they've shoveled into the beleaguered mortgage giant.
"Given the strength of our future profitability, [it is] possible that we will be able to pay dividends that would be equal to or greater than the amount of money that we've received from the Treasury Department," Mayopoulos said.
Since 2008, Fannie Mae has paid back almost $36 billion of the $116 billion in bailout funds it received. But projections included in the President's budget released this week suggest that total dividends paid to the Treasury by Fannie Mae over the next 10 years could ultimately exceed the total bailout sum by a whopping $51 billion, meaning taxpayers and the federal government could actually make money off of the much-maligned bailout of the mortgage financier.
By contrast, last year's budget projected Fannie and Freddie would result in net losses of about $28 billion for the government through 2022.
Mayopoulos credited much of the turnaround in Fannie Mae's fortunes to "building a new book of business that will be profitable" while "managing the legacy book to minimize losses." He also said the company is focusing on pricing risk more appropriately.
But while things seem to be coming up roses for the GSEs, it shouldn't delay policymakers' discussions about the future of housing finance and the government's role therein, Mayopoulos warned.
"There is a risk that policymakers will look at our profitability and say we don't need to act on this soon," he said. "I think that would be a mistake."
Uncertainty still clouds the housing finance sphere, which continues to prevent a greater a role for private-label mortgage financing in the meantime. The sooner there is more clarity about the future housing finance system will look like and what regulations will govern it, the sooner private capital will return to the market and the sooner entities such as Fannie and Freddie can step away from the outsized role they played in mortgage financing in the wake of the housing collapse.
Still, Fannie Mae and Freddie Mac's recent profitability gives lawmakers a fuller range of options when it comes to charting the future path of the housing finance system, Mayopoulos argues, and eliminates the assumption that doing away with the GSEs means accepting billions of dollars in taxpayer losses.
"What this has done is freed policymakers to think about what the full range of possibilities should be," he said. "The key is getting to an answer in the foreseeable future because no matter what you think the future housing finance system should look like, everybody agrees that at the moment the taxpayer shouldn't be on the hook for 90 percent of the market.
"That doesn't make sense, no matter what you think the future of the housing finance system should look like."