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

“Markets with increasing foreclosure activity in 2012 took the first step in finally purging delayed distress left over from the bursting housing bubble,” said Daren Blomquist, vice president at RealtyTrac. “Meanwhile, the underlying fundamentals in many of those markets are slowly improving, making it an opportune time to absorb additional foreclosure inventory this year — and that is particularly good news for buyers and investors hungry for more inventory to purchase in those markets.”

(Read More: Link Between Credit and Mortgages: Not What You Think)

RealtyTrac ranked the top markets for investors to set their sights in 2013, based on months’ supply of foreclosure inventory, percentage of foreclosure sales, the foreclosure discount and the percentage increase in foreclosure activity in 2012. Five of the top ten are in Florida, including Palm Bay, Tampa, Jacksonville and Orlando. Florida requires a judge in the foreclosure process and therefore has an extremely large backlog.

(Read More: Feds’ ‘Fixer-Upper’ Loan Helps Tidy Up Foreclosures)

New York, another judicial state, fills 4 of the top ten spots, with Rochester, Albany and the New York City area leading. Chicago rounds out the roster.

The worst markets to look for foreclosures are largely out West, where the foreclosure crisis hit first and where investors have already bought so many properties that they are now fighting for what is left. Low supplies have led to bidding wars in cities like Phoenix, Las Vegas, San Jose, CA and even Portland, OR.

(Read More: Best US Housing Markets for Buyers and Sellers)

It is truly a tale of east versus west, just as it was at the start of the foreclosure crisis with the west faring far worse than the rest of the nation. Now it is just the opposite, as demand for distressed properties continues to increase and supply determines the best bargain destinations.

(Read More: Facing Foreclosure? Don’t Just Sit There—Act Now)

Article source: http://www.cnbc.com/id/100423428

Fewer Americans are falling behind on their mortgage payments; in fact, the fewest in two years. Mortgages just one payment past due (30 days) fell to their lowest level since just before the recession began. Is it delays in paperwork from the so called “robo-signing” (faulty paperwork) foreclosure servicing scandal? No. It’s actual fundamentals in the economy and the mortgage market. Go figure.

“As we got toward the end of 2010 we began to see another drop in weekly claims for unemployment insurance. I think that’s a key driver of the short term delinquencies,” notes Jay Brinkmann, chief economist at the Mortgage Bankers Association.

But even more significant is the improved underwriting that began after the mortgage market crashed. “The loans that are in the system now on average are better quality than what was in there before,” says Brinkmann, who explains that loans usually go bad in the first three years of life. We’re now past the delinquency peak on loans that were underwritten during the worst, headiest phase of the housing boom in 2006 and 2007. “These new loans are less likely to go bad,” Brinkmann adds.

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