Government-Sponsored Enterprises (GSEs), Freddie Mac (FMCC) and Fannie Mae (FNMA), will pay the U.S. Department of Treasury a sum of $10 billion as fourth quarter dividends. This was seen as a sign of the housing market faring very well after the last housing crisis. The GSEs’ profits can be used to fund other government programs.
A huge concern is brewing among lenders and community groups over how the dividend would impact cash reserves. A letterto the US Treasury and FHFA was sent asking to suspendpayments of the said dividends. If these concerned groups were to have it their way, it would be better that the funds stay with the enterprises to help rebuild the dwindling capital reserves. The reserves are expected to hit zero by the end of 2017. If these funds run out, the GSEs will no longer have capital to work on should a housing market decline arise.
Banking Committee Chair, Senator Mike Crapo, started working on concords regarding the matter. Housing industry groups have initiated meetings to discuss the subject looking for possible aids.
FHFA: GSEs Will Pay
The Federal Housing Finance Agency (FHFA) has affirmed that both GSEs will be paying as scheduled. Fannie Mae was scheduled to begin payment in March with a dividend amounting to $5.5 Billion, while Freddie Mac will pay a sum of $4.5 billion. These GSEs reported having $5 Billion and $4.8 Billion of fourth quarter profits respectively.
Both companies have been placed into government conservatorship after the recent housing crisis. Bloomberg Newssaid in a report that there is a strong possibility that both could be returned to shareholder control. This can be a part of a major reform both companies are to undergo if plans of the newly confirmed Treasury Secretary Steven Mnuchin should push through.
The Administration has expressed its desire for an extensive overhaul in the housing financing industry, although it has not yet released any official directives on what course it will take.