Taxpayers Make $25B on Mortgage Sale


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Jennifer Liberto, WASHINGTON, CNNMoney

Treasury just scored a big win — it got rid of one of its financial-crisis era portfolios of mortgage-backed securities and made a $25 billion profit, the department announced Monday.

Treasury bought $225 billion worth of mortgage-backed securities during the height of the financial crisis starting from October 2008 through December 2009.

Some of those securities were backing up loans thought to be worthless, financial analysts reported at the time. But Treasury’s portfolio was made up mostly of 30-year fixed rate mortgage backed securities were guaranteed by Fannie Mae or Freddie Mac, making them more valuable.

Last March, Treasury started the process of selling those securities. The agency reported that the total of cash from the sales, the principal and interest paid taxpayers back $250 billion.

However, if the mortgages behind those securities fail, taxpayers will still be on the hook, since federal housing giants guarantee the loans and taxpayers have been propping up Fannie Mae and Freddie Mac.

Treasury heralded the profit, calling it a successful winddown of a useful program that helped the nation navigate the financial crisis.

“The successful sale of these securities marks another important milestone in the wind down of the government’s emergency financial crisis response efforts,” said Assistant Secretary for Financial Markets Mary Miller in a statement.

The profit from the sale of the mortgage-backed securities appears to be the largest Treasury has made on any of its crisis-related programs.

Treasury’s Mortgage Backed Securities program was tied to saving Fannie and Freddie. That program was separate from the Troubled Asset Relief Program, when Congress gave Treasury some $700 billion to bail out banks and save the economy. Of that, Treasury only paid out $411 billion.

Several parts of TARP have also turned a profit, like its bank bailout program. Treasury still owns a big chunk of American International Group and a smaller chunk part of General Motors, among other firms.

Congress authorized $700 billion for the Troubled Asset Relief Program, but Treasury only paid out $414 billion. Of that amount, $331 billion has been paid back, including profits, interest and dividends made from investments.

The repayments from the mortgage-backed security program will go to pay down debt, unless Congress decides otherwise.

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