WASHINGTON–Fannie Mae and Freddie Mac once again have capital reserves.
New data released by the Treasury Department after both of the government-sponsored enterprises made their quarterly dividend payments to the government shows that each withheld several billion dollars in order to build reserves.
The ability to withhold some funds follows an agreement between Treasury and the Federal Housing Finance Agency that ensures each entity has sufficient capital on hand to “cover other fluctuations in income in the normal course of each Enterprise’s business.”
Under the previous version of the Preferred Stock Purchase Agreements that went into effect when the government took the GSEs into conservatorship, Fannie and Freddie send dividends to the Treasury each quarter that they are profitable.
Those same PSPAs also prohibited the GSEs from rebuilding capital and each of the GSEs’ capital base was required to be reduced, with their capital reserves scheduled to be drawn down to $0 in 2018. That scenario changed following the new agreement, which allows the GSEs to hold a $3 billion capital reserve.
Collectively, the GSEs made third-quarter dividend payments at year-end to the Treasury of $2.897 billion. Of that, $2.249 billion came from Freddie Mac and $648 million came from Fannie Mae.
Both companies, which have been operated under government conservatorship since the financial crisis, reported big profits, with Freddie Mac posting $4.7 billion in profit and Fannie Made $3 billion
Through the third quarter of 2017, Fannie and Freddie have now paid approximately $278.783 billion to the Treasury in dividend payments since 2008.