Home prices are up.
Foreclosures are down.
Construction is up.
And now comes the latest sign of the U.S. home market’s revival: Fannie Mae, the mortgage giant that nearly collapsed five years ago, has earned its biggest yearly profit ever.
Fannie Mae earned $17.2 billion last year and said Tuesday that it expects to stay profitable for “the foreseeable future.” It also paid $11.6 billion in dividends to the U.S. Treasury in 2012.
And last year was Fannie’s first since its takeover by the government in 2008 that it asked for no federal aid. As recently as 2011, Fannie lost nearly $17 billion and requested and received nearly $26 billion in aid.
The speed of Fannie’s resurgence is a testament to a much healthier U.S. mortgage market.
Fannie’s “profit recovery has come at a faster pace than I thought it would,” said Bert Ely, a banking industry consultant.
“We expect to remain profitable for the foreseeable future and return significant value to taxpayers,” said Susan McFarland, the firm’s chief financial officer, in releasing the new profit numbers according to The Christian Science Monitor.
Meanwhile, the nation’s home builders this week called on Congress to move forward on bipartisan housing finance reform to ensure that affordable housing credit can be delivered through a competitive, efficient, sound and stable system that maintains the crucial element of a federal backstop for the mortgage market, according to the Conway Daily Sun.
Citing recent reports produced by the Bipartisan Policy Center Housing Commission, National Association of Home Builders, Mortgage Bankers Association and others, National Association of Home Builders’ chairman Rick Judson said there needs to be change.
“Multiple stakeholders have now weighed in with their proposed approaches to this important task. While the details of those approaches may differ, one thing they all have in common is the need to maintain some form of federal support to the conventional mortgage market,” he said. “That’s the point from which we believe Congress should start as it charts a path for the eventual wind-down of Fannie Mae and Freddie Mac.”
The association’s proposed framework for housing finance system reform envisions transitioning Fannie Mae and Freddie Mac to a new securitization system for conventional mortgages backed by private capital and a privately funded federal mortgage-backed securities fund. Such a plan would need to be phased in over a period of time, with Fannie Mae and Freddie Mac remaining operational until the alternative system is fully functioning.
“As the housing market recovers and begins to add crucial strength and jobs to the national economy, it is essential that Congress ensure a stable and affordable flow of credit for home mortgages and housing construction,” said Judson. “We encourage lawmakers to pursue the path that NAHB has recommended. Most importantly, a federal backstop should be a fundamental element of bipartisan legislation moving forward.”
As recently as mid-2011, some experts had suggested that Fannie and Freddie were so deep in debt to the government that it could take decades for them to repay taxpayers. But the past 12 to 18 months have marked a solid advance for the housing market, noted Ken Mayland, president of ClearView Economics, and Fannie and Freddie will continue to benefit.
“It’s a spirited recovery,” he said. “The housing sector will be by far the strongest (economic) sector growth-wise.”