Improved Housing Market May Enable Fannie Mae And Freddie Mac To Repay Tax Payers Sooner

Monday, October 29, 2012 07:39
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Improved Housing Market May Enable Fannie Mae And Freddie Mac To Repay Tax Payers Sooner

Tags: debt | Economic Outlook | mortgage debt

The improvement in the housing market will cause Fannie Mae and Freddie Mac to start repaying their bailout loan to taxpayers sooner than originally projected.

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Since the two companies were placed into conservatorship by the government, they have borrowed almost $188 billion from the Treasury and paid back $46 billion in dividends.
 
It was estimated last year by regulators that the two agencies would pay back $124 billion by 2014. But projections for repayment have improved because the improvement in home prices
have boosted the bottom lines of both agencies.
 
The Obama administration along with the FHFA also agreed in August to restructure the way the two companies are required to pay back the loans.
 
It is assumed that both will eventually be able to repay the loans, although more government assistance may be needed if housing prices reverse their upward trend.
 
If the fiscal cliff occurs, the upward momentum in the housing market may be reversed or, at least, stalled as consumers are hit with higher taxes and may decide to prolong the release of pent-up demand in the housing market.
 

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