Fannie Mae, the government-backed company that insures mortgages against default, made $17.2 billion last year, making it the third-most profitable financial firm in 2012, after JPMorgan Chase and Wells Fargo, the New York Times DealBook blog reported yesterday. But this year, Fannie's earnings could exceed even those of JPMorgan and Wells Fargo, if it decides to book a large tax-related gain. The huge profits rolling in at Fannie, and at its corporate sibling Freddie Mac, reflect the enormous role the government is playing in the housing market nearly five years after the crisis. As a result, the earnings will intensify the debate over the amount of involvement that government should have in housing. Fannie and Freddie charge fees in return for a guarantee that they will pay back mortgages that default. In the first years after the crisis, that fee revenue was overwhelmed by losses. As those have abated, profits have returned for the two mortgage giants. The big question looming over the housing market is how quickly to remove the support provided by Fannie and Freddie.
