The difference this quarter is that the dividend is huge. Thanks to the company’s new profitability, Fannie Mae is able to take a tax credit from years ago worth over $50 billion, according to its earnings release:

As a result of actions to strengthen its financial performance and continued improvement in the housing market, Fannie Mae’s financial results have improved significantly over the past five quarters. Based on analysis of all relevant factors, Fannie Mae determined that the release of the valuation allowance on its deferred tax assets was appropriate.

Therefore, Fannie Mae will pay the Treasury $59 billion by the end of this quarter, bringing its total tally of dividend payments to $95 billion—close to the $117 billion it originally drew. Again, the money does not go to pay back that draw. So where does it go?

(Read More: Fannie Mae Should Be Abolished, Says Barney Frank)

“It’s up to the Treasury to decide what to do with it,” said Fannie Mae CEO Timothy Mayopoulos in a conference call with reporters.

With Fannie Mae and its smaller cohort, Freddie Mac, turning so much profit, the push to dismantle them becomes far more complicated. Unlike several years ago, they are now making the government money at the same time that the feds should be winding them down.

“There is a risk that policy makers will look at our profitability and conclude that they don’t need to take action to reform the housing finance system,” said Mayopoulos. “That would be a mistake.”

As of now, Fannie Mae, Freddie Mac and the Federal Housing Agency—all government sponsored entities (GSEs)—provide the bulk of the nation’s housing finance. The private market has yet to dive back in with both feet. Fannie and Freddie are still crucial to the housing recovery, but should the government reap all the rewards rather than mortgage holders or investors?

“It seems strange that everyone else who borrowed from U.S. Treasury in the crisis is allowed to pay back, but the GSEs are neither allowed to rebuild capital nor repay. Shouldn’t we get to reform rather than use them as a budget tool?” asks Joshua Rosner, an analyst at Graham Fisher.

Lawmakers are busy debating how to create a private housing finance system with at least a modest government back-stop. Simultaneously, Washington is fighting a wider budget battle, owing to an enormous federal deficit. The two are now intimately connected, and Fannie’s new profitability is the link.

“If Fannie and Freddie this year effectively ‘pay back’ all the bailout money they received since late 2008, I think we need to think long and hard about the need to continue collecting money from the firms. Is it punishment for past sins? Or is it because the government needs cash cows?” asks Guy Cecala of Inside Mortgage Finance.

“And while it may sound like crazy talk, we probably also need to at least discuss whether Fannie and Freddie should be taken out of conservatorship once they pay back the money Treasury advanced them and they are in fact solvent,” he added. “Unfortunately, the current Treasury agreement treats them as wards of the state regardless of how much money they return to the government or how much money they earn.”

The housing crash was a game-changer for housing finance in the United States. That said, the recovery of both the overall housing market and the companies that fund it will necessitate new thinking as well.

—By CNBC’s Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Questions? Comments? RealtyCheck@cnbc.com

Article source: http://www.cnbc.com/id/100724407

Fannie Mae and Freddie Mac were put under government conservatorship in 2008, in the wake of the housing and mortgage crash. (Related Link: Fannie Freddie Takeover.)

“With today’s announcement, we are taking the next step toward responsibly winding down Fannie Mae and Freddie Mac, while continuing to support the necessary process of repair and recovery in the housing market,” said Michael Stegman, Counselor to the Secretary of the Treasury for Housing Finance Policy in a press release.

Treasury officials announced they will now require the two to reduce their investment portfolios at a faster rate, 15 percent a year instead of the previous 10 percent.

The Treasury is also replacing the ten percent dividend payments the two make to Treasury on its preferred stock investments with a “quarterly sweep of every dollar of profit that each firm earns going forward.” Fannie Mae and Freddie Mac only became profitable again this year, the first time since the crash of the market.

“We see this as a positive for housing, as it ensures that Fannie and Freddie will remain in business,” writes Jaret Seiberg of Guggenheim Partners. “Absent Fannie and Freddie, we believe housing finance will become more expensive and less available.” (Related Link: US Home Builders Begin to See Credit Thaw.)

Seiberg also notes that this is a positive for private mortgage insurers because Fannie Mae and Freddie Mac require such insurance when a borrower puts down less than 20 percent in equity on a loan. Without Fannie and Freddie, the private insurers would lose a lot of business.

The announcement, however, does not really speak to the future of the GSEs, rather just rids them of a counterproductive debt repayment situation. With the former 10 percent dividend requirement, Fannie and Freddie, up until the past two quarters, were actually having to borrow more from the Treasury in order to pay the Treasury the dividend.

Questions?  Comments?  And follow me on Twitter @Diana_Olick