Fannie Mae’s Increased Market Share Riles Private Lenders

Massive Profits and Major Dividends

President and CEO of Fannie Mae, Timothy J. Mayopoulos, released a progress report for 2012 which details some of its activities, performance, and overall goals. Many are concerned and they post that Fannie Mae and Freddie Mac need to be taken out of government conservatorship and greater housing reform enacted. Fannie Mae currently pays nearly all of its profits to the government in dividends, this is not a repayment to take itself out of conservatorship. Rumors in the housing industry hint at a growing concern that Fannie Mae is actively maintaining its market dominance over Freddie Mac and that policy makers may not change how it operates but instead use it as a federal piggy bank.

According to Mr. Mayopoulos, in an exclusive interview with Bloomberg, the current massive profits and market share are the results of years’ worth of work and that this result should come as little surprise to those in the know. He also went on to say that he doesn’t think anyone wants taxpayer dollars supporting 90% of the lending market. Barney Frank, a longtime former congressman from Massachusetts, now posits that Fannie Mae and Freddie Mac should be abolished. Much of the profit is from a $60 billion accounting tweak that changed how deferred tax assets were addressed so that a single dividend payment was made to the U.S. Treasury.

The previously mentioned accounting tweak is interesting to those who recall the accounting practices that brought down Enron. Others report that the taxpayers are receiving benefit from this. Although manipulated numbers are rarely real and most have not thoroughly analyzed the situation. Overall, it’s a scary time in the United States’ housing market, for more than a few people.