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Fannie Mae, Freddie Mac post profits driven by legal settlements

Margaret Chadbourn
A stands outside Fannie Mae headquarters in Washington February 21, 2014. REUTERS/Kevin Lamarque

By Margaret Chadbourn

WASHINGTON (Reuters) - Government-controlled mortgage finance firms Fannie Mae and Freddie Mac will send the U.S. Treasury dividends totaling $10.2 billion after posting quarterly profits driven mainly by income from legal settlements.

Fannie Mae posted net income of $5.3 billion for the three months ended March 31, which included $4.1 billion from settlements of litigation over mortgage-backed securities issued by banks ahead of the financial crisis.

Freddie Mac earned a net income of $4.0 billion in the same period, reflecting $4.9 billion from litigation over mortgage-backed securities it had acquired.

Fannie Mae and Freddie Mac will have returned $213.1 billion to taxpayers by the end of June in return for the $187.5 billion in aid they received after being placed under the government's wing at the height of the financial crisis.

The companies, which own or guarantee 60 percent of all U.S. home loans, were placed in conservatorship in September 2008 as soured loans threatened their solvency.

Under their bailout terms, Fannie and Freddie must turn their profits over to the Treasury as dividends on the controlling stake the government took when it seized them. They cannot repurchase the government's share.

(Reporting by Margaret Chadbourn; Editing by Sofina Mirza-Reid)