More Good Economic News: Fannie Mae to Repay $116 Billion Bailout by Year’s End

At the time of the financial bailout in 2008, the number seemed impossibly high: $116 billion.

That’s how much of taxpayers’ money was used to bailout Fannie Mae, the government-controlled mortgage company that was hit hard by the Great Recession last decade.

However, Fannie Mae reported this week that its third quarter profit more than quadrupled this year, meaning it can repay another $10.2 billion of the federal loan it received in 2008. At this pace, the mortgage giant will have repaid most of the loan by the end of this year.

That’s good news for the overall economy. The cause of Fannie Mae’s enormous profits – more than $8 billion this past quarter – is due to a housing market that is improving. It was the 7^th consecutive quarter of gains, according to the Fannie Mae website.

Fannie Mae works with homebuyers to finance mortgages. The government-controlled mortgage giant was able to back 3.4 million home purchases since Jan. 1, 2009, according to the website, and the refinancing of 12 million mortgages.

Fannie Mae also enabled financing of 2 million units of multifamily rental housing during this same period.

Those numbers might surprise those who thought the government-controlled mortgage company had done little since the recession. However, its future remains unclear as bills in the U.S. Senate and House of Representatives would each dramatically reduce the role of Fannie and Freddie Mac, the other government-backed entity that either buys or guarantees most U.S. mortgages.

The Senate bill would keep both agencies involved in the mortgage industry, while the House bill almost completely turns mortgages over to private companies, according to an article in USA Today.

USA Today also reported that an agreement signed last year by officials with Fannie Mae and the government sets 2018 as the year to stop the agency’s operations. That could change with the bills now being considered by Congress.

Meanwhile, Fannie Mae also released its own study this week showing that consumer outlook on the housing market took a hit from last month’s government shutdown and the continued congressional debate over setting a ceiling for the government’s debt level.

The percentage of those who say now is a good time to buy a house fell to 65%, and the number of those who expect mortgage rates to increase next year fell to 57%. Despite these numbers, Fannie Mae officials said the ongoing improvement in the housing market should not abate.

Doug Duncan, a senior vice president and chief economist at Fannie Mae, said on the Fannie Mae site that the numbers show people are “highly sensitive” to debate in Washington.

However, he said, “While this decline in consumer optimism may portend a slowing of the housing recovery, supply constraint data suggest that we are likely to see continued positive growth in home prices. “

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