NEW YORK -- Mortgage finance giants Fannie Mae and Freddie Mac received the biggest federal bailout of the financial crisis. And nearly $100 million of those tax dollars went to lucrative pay packages for top executives, filings show.
The top five executives at Fannie Mae received $33.3 million in 2009 and 2010, while the top five at Freddie Mac received $28.1 million. And each company has set pay targets of as much as $17 million for its top managers for 2011.
That's a total of $95.4 million, which will essentially be coming from taxpayers, who have been keeping the mortgage finance giants alive with regular quarterly cash infusions since the Federal Home Finance Agency (FHFA) took control of the companies in September 2008.
Fannie CEO Michael Williams and Freddie CEO Charles Halderman, each received about $5.5 million in pay for last year, and they could receive more when their final deferred compensation for 2010 is set. All the executives receive a significant portion of their pay in the year or years after they earn it.
The CEOs' pay targets for 2011 are about $6 million a piece, though Halderman might not get much of that money since he's announced plans to leave Freddie sometime in 2012. He must still be at the company in order to receive the deferred compensation. His base pay for 2011 is $900,000, with most of the rest of his compensation coming in deferred payments.
The salary filings were all made by the companies in early 2011, but received relatively little attention until a recent report by Politico, the political news website, which highlighted about $12.8 million in bonuses that the executives received for last year.
'An Added Insult to the Taxpayers'
That published report sparked a political firestorm on Capitol Hill that could lead to legislation to put strict limits on pay at the two firms. But it only told part of the story. The full extent of salary, deferred pay and bonuses are only found in the filings.
Rep. Spencer Bachus, the chairman of the House Financial Services Committee, has scheduled a vote in his committee Tuesday on his own legislation that would suspend the compensation packages of top executives at the firms.
"The fact that the top executives of these failed companies are receiving multimillion dollar pay packages, plus millions more in bonuses, is an added insult to the taxpayers who are forced to foot the bill," Bachus said in a statement announcing plans to hold the vote.
The Democrat-controlled Senate Banking Committee also plans to hold a hearing on the matter on Tuesday. Additionally, the Republican-controlled House Committee on Oversight and Government Reform is set to call Edward DeMarco, the acting director of FHFA, and the CEOs of the two firms, to a hearing on the pay packages on Wednesday.
Sixty senators from both parties have already sent a letter to DeMarco asking that he change the compensation policy of the two companies. FHFA has final say on pay at the two companies.
"The idea that Fannie Mae and Freddie Mac, which rely on taxpayer funding to stay afloat, must offer excessive bonuses to its executives to attract effective management strains credulity," the letter said.
The Price of Effective Management?
DeMarco responded to the senators saying that the executives who were running the companies in 2008 when the problems occurred have left without any golden parachutes, and that effective management is needed to make sure that taxpayer losses at the firms do not rise and the companies continue to function. He said current executive pay at the firm is about 40 percent less than before the bailouts.
"I need to ensure that the companies have people with the skills needed to manage the credit and interest rate risks of $5 trillion worth of mortgage assets and $1 trillion of annual new business that the American taxpayer is supporting," he wrote.
Spokespeople for Fannie and Freddie declined to comment ahead of the hearings.
The latest cost estimate from FHFA is that the two bailouts will end up with a net cost to taxpayers of about $124 billion through 2014, though that figure could rise as high as $193 billion. Even the lower cost estimate will make it the most expensive bailout of the financial crisis -- far more costly than bailing out the nation's banks or automakers.
The CEOs and the other top executives at Fannie and Freddie get all their pay in cash, and none of it in company stock , which is generally deemed worthless.
The company filings that disclosed the pay back in February also defended the pay based on the work they had done.
Fannie's filing said that under Williams' leadership, the company "made solid progress in managing credit losses on its pre-2009 book of business, acquired a 2010 book of business with a strong credit profile that is expected to be profitable, and achieved substantial progress in making the company more operationally disciplined and efficient."
Fannie, Freddie Execs Score $100 Million in Bonuses
Quarterly increase in foreclosures: +32%
# of Foreclosures Q3 2011: 2,273
% home value down from peak: -12.42%
Columbus hit its median home value peak in the first quarter of 2006. Since that time, home values have declined a relatively modest 12.4%, including a 3.4% drop last year. By the second quarter of 2012, Fiserv projects that homes in the area will lose another 2.3% of their value. Median family income in Columbus is above the national average, and unemployment is just 8%, a full percentage point less than the national average. Despite the fact that things don’t look so bad for the Columbus housing market compared to other regions, the city foreclosure rate still increased by 32% last quarter. A total of 2,273 homes were foreclosed upon during that time.
Quarterly increase in foreclosures: +35%
# of Foreclosures Q3 2011: 1,743
% home value down from peak: -59.3%
There is arguably no single housing market with a worse long-term outlook than southwest Florida, and the Cape Coral-Fort Myers region is the worst of these. Housing prices in the have already dropped 59.3% from their peak, and Fiserv project them to decline another 12.2% by the second quarter of next year. According to Corelogic, 47% of the homes in the Cape Coral-Fort Myers area are worth less than their mortgages because of declining values. Foreclosures have increased 35% in the last quarter, and with no sign of recovery in the immediate future that trend may worsen in the coming months.
Quarterly increase in foreclosures: +36%
# of Foreclosures Q3 2011: 1,348
% home value down from peak: -59.1%
As of last month, Vallejo-Fairfield had the second-highest foreclosure rate in the country, with one out of every 51 homes being foreclosed upon in the third quarter of this year. This was a 36% increase in foreclosures from the second quarter. Home values have dropped 7.5% in the past year and are projected by Fiserv to drop an additional 4.9% by the second quarter of 2012. A remarkable 53% of homes in the region are worth less than their mortgages. This is the seventh highest rate of homes with underwater mortgages in the country.
Quarterly increase in foreclosures: +41%
# of Foreclosures Q3 2011: 2,174
% home value down from peak: -54%
Fresno’s economy has continued to suffer since housing prices began to drop in 2006. It currently has an unemployment rate of 14.9%, which is one of the highest in the country. Home prices peaked in the first quarter of 2006 and have been decreasing since. The metropolitan area also has one of the highest underwater mortgage rates in the country, with a negative equity share of nearly 46%. In the last year alone home prices have dropped 11%.
Quarterly increase in foreclosures: +44%
# of Foreclosures Q3 2011: 1,039
% home value down from peak: -53.4%
More than 1,000 homes were foreclosed upon in the Palm Bay-Melbourne-Titusville region last quarter, a 44% increase from the previous three-month period. Nearly half of the region’s homes are worth less than their mortgages. With Fiserv projecting home values would drop 7.1% by next year and another 4.9% the year after that, things may just get even worse.
Quarterly increase in foreclosures: +49%
# of Foreclosures Q3 2011: 2,559
% home value down from peak: -39.3%
Jacksonville has experienced a quarterly increase in foreclosures of nearly 50%. Home prices have dropped 39.1% since their peak in the second quarter of 2006. The metropolitan area’s negative equity share also exceeds 46%, making it among the worst in the country for underwater mortgages. Home prices are expected to decrease another 10.7% by the second quarter of 2012.
Quarterly increase in foreclosures: +55%
# of Foreclosures Q3 2011: 1,956
% home value down from peak: -15.9%
Nearly 2,000 homes were foreclosed upon during the last quarter, a 55% increase from the previous three months. Unlike many of the regions on this list with accelerating home foreclures, Cincinnati’s local economy is doing fairly well. Home prices are only down 15.9% from their peak in the first quarter of 2006. Unemployment and median family income are both better than average. One possible explanation for this recent increase may be that nearly a third of the total decline in home value since the peak has occurred in the past 12 months.
Quarterly increase in foreclosures: +57%
# of Foreclosures Q3 2011: 1,673
% home value down from peak: -51.4%
The Sarasota-Bradenton-Venice metropolitan area has seen the third largest increase in the country in foreclosures in the third quarter. However, only 1,673 homes out of the 311,475 on the market were foreclosed upon. The housing market has suffered a great deal since housing prices peaked in the first quarter of 2006. Since then, overall home prices have dropped 51.4%.
Quarterly increase in foreclosures: +67%
# of Foreclosures Q3 2011: 2,003
% home value down from peak: -15.8%
The Boston metropolitan area is considered to have a particularly resilient housing market. In the most recent quarter, however, foreclosures have increased 67%. Home prices have only dropped 15.8% since they peaked in the third quarter of 2005. The national average is -32.3%. From the second quarter of 2010 to the second quarter of 2011, home prices dropped a mere 1.7%.
Quarterly increase in foreclosures: +151%
# of Foreclosures Q3 2011: 1,358
% home value down from peak: -14.9%
Albuquerque’s housing market, like Boston’s, is relatively healthy. While home prices decreased 32.3% nationally after their peak, home prices in Albuquerque only decreased 14.9% since they peaked. Regardless, foreclosures have recently skyrocketed. In the third quarter of 2011, the number of foreclosures in Albuquerque increased 151%. According to New Mexico Business Weekly, the lack of job creation in the area has been a major contributor to this problem.