The Federal National Mortgage Association, popularly known as Fannie Mae will be paying back $59.4 billion to the U.S. Treasury as it reports record quarterly profits and hopes to capitalize on the loans it had received from the department during the housing crisis.
Fannie Mae had received an aid of $116 billion when the housing market crashed in 2007-08. With its latest imbursement, it will have paid off $95 billion of the total debt. However, it still has to repay $21 billion of the loan.
Fannie Mae's large payment could keep the U.S. Treasury department coffers full for some time. The American government has been struggling with funds. It has already reached a debt of $16.4 trillion. In late January, the U.S. Congress voted the debt-limit ceiling date to be extended until May 18.
But now that Fannie Mae is making the huge cash payment, experts believe that the debt ceiling date could be extended by as long as September.
"The one-time payment that Fannie Mae has announced makes it very clear that we're not going to hit the effective deadline until at least Labor Day. The statutory debt limit will be reached in just a few days and because of the extraordinary measures that are available and cash flows that we now can predict it will not be until at least after Labor Day," Jacob J. Lew, U.S. Treasury Secretary said in an interview with CNBC TV.
Though this is good news for the government, some analysts are worried about how this will affect the government's decision on handling Fannie Mae and Freddie Mac, reports Bloomberg.
Talks of combining the two firms to form a separate new entity have been doing the rounds for long now. The Federal Housing Finance Agency (FHFA), regulator of the government-backed mortgage firms- Fannie Mae and Freddie Mac, announced Monday, March 4 that operations of the two companies will be combined to form a separate entity that will look after securitized home loans.
"The profits will hurt the pace at which policy makers decide what to do with Fannie Mae and rival Freddie Mac because they give the illusion that mortgage finance is a great business," Jim Vogel, debt strategist at FTN Financial wrote in note to clients.
On Thursday, May 9, Fannie Mae reported its profits for the quarter ended March 31, 2013. The government backed firm announced its quarterly net income to be $58.7 billion and a total profit of $8 billion for the first three months of 2013 alone. The immense profits come on a rebounding housing market.
