White House: Fannie, Freddie could hand government $179.2 billion in profits

The bailed-out housing giants Fannie Mae and Freddie Mac could end up sending the government $179.2 billion in profits over the next decade, according to the White House.

New budget analysis released Monday indicates that if the terms of the government-sponsored enterprises are not changed, the two will end up sending a significant amount of money to the federal government due to the recent surge in home prices.

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Fannie and Freddie have reported record profits in the past year amid an upturn in the housing market. The heads of both enterprises have said they expect their profit levels to shrink going forward, after the two were able to produce record numbers thanks to some tax write-offs and bank settlements.

But under the terms of their government rescue, modified in 2012, they must submit all profits to the government.

A group of private investors with holdings in the enterprises has filed a lawsuit challenging that change, arguing the government should have a reduced stake in the two as they become more profitable.

The government has pumped $187 billion into Fannie and Freddie since taking them over in 2008. But by the end of March, they are expected to have paid the government over $200 billion. Those funds are not technically a repayment of the rescue money, but a separate pool of funds.

The White House budget document assumes that Fannie and Freddie will remain under the terms of such an agreement through 2024, but lawmakers and the administration are hoping to change that.

Both sides are currently working on comprehensive housing finance reform legislation, with an eye towards drastically reducing the outsized role Fannie and Freddie play in the housing market. Currently, the vast majority of mortgages end up being backed by the two enterprises.