Although executives at Fannie Mae and Freddie Mac would love to see their dividend payments to the U.S. Treasury cut in half, it's unlikely that it will happen, according to a new report from Keefe, Bruyette & Woods (KBW).

"Although both companies are close to breakeven on an operating basis, the large dividend to the government will continue to increase their cumulative debt to the government," writes KBW analyst Bose George. "Further, we see no reason for the government to reduce the dividend."
Both firms turned an operating profit in 4Q but after paying 10% dividends to Treasury, they lost money.

Sources told National Mortgage News that executives at the two firms have approached the Treasury Department and Federal Housing Finance Agency about reducing the dividend to as low as 5%. Both the GSEs and officials at the two agencies declined to discuss the matter.

To date, the two have required $150 billion of assistance from the Treasury.

In its report, KBW noted "we continue to believe that the GSEs will have significant negative equity for the foreseeable future."

Although they are controlled by the government, their common shares continue to trade on the Over-the-Counter market — for under 50 cents a share, each.

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