NEW YORK (AP) — The CEOs of government-backed mortgage giants Fannie Mae and Freddie Mac are getting large raises, to about $4 million a year, as the government relaxes rules that were imposed on the companies after they suffered big losses and were bailed out.
In forms filed with the Securities and Exchange Commission on Wednesday, the companies disclosed that Fannie Mae CEO Timothy Mayopoulos and Freddie Mac CEO Donald Layton will get annual base salaries of $750,000 each, $2.1 million in fixed deferred compensation and $1.2 million in at-risk deferred salary. It does not include bonuses. Their pay had been capped at $600,000 a year.
The Federal Housing Finance Agency, which oversees the companies, said the new plans take CEO performance into account and defer compensation so the executives stay with the companies. It said Mayopoulos and Layton will be paid less than most CEOs at similar companies.
Sen. Richard Shelby, the Alabama Republican who heads the Senate Banking Committee, called the regulators' approval of the raises "inappropriate and irresponsible."
"As long as American taxpayers continue to serve as the backstop for Fannie and Freddie, FHFA should make decisions that protect taxpayers instead of ones that expose them to further risk," Shelby, a longtime critic of Fannie and Freddie, said in a statement.
Bipartisan legislation to reshape the housing finance system and wind down the two mortgage giants was approved by the Banking Committee last year.
A Democratic member of the banking panel, Sen. Mark Warner of Virginia, also criticized the regulators' decision, saying it appears to signal "a return to business as usual."
The compensation limits were imposed in 2012, shortly before the two men became CEOs of their respective companies. At that time, Fannie and Freddie had been in government conservatorship for more than three years, as they had suffered losses on risky mortgages in the housing market bust. Even after the $170 billion taxpayer bailout, their top management stayed well-compensated, leading to criticism of both the companies and the FHFA.
The gradual recovery of the housing market in recent years has made Fannie and Freddie profitable again, and they have fully repaid their government bailouts.
Officially known as Federal National Mortgage Association and Federal Home Loan Mortgage Corp., Fannie and Freddie own or guarantee about half of all U.S. mortgages, worth about $5 trillion. Along with other federal agencies, they back roughly 90 percent of new home loans. The companies don't directly make loans to borrowers. Instead they buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. That helps make loans available.
The FHFA allowed the companies to propose new compensation plans in May with the goal of helping them keep their CEOS, set up succession plans, and maintain continuity in management. The proposals had to include pay-for-performance aspects, couldn't include bonuses, and couldn't be higher than the 25th percentile for CEOs of comparable companies.
Fannie Mae said Wednesday that Mayopoulos' compensation is still substantially below that level.
In 2011 Fannie Mae CEO Michael Williams was paid $5.3 million and Edward Haldeman Jr. of Freddie Mac was paid $3.8 million. According to a government report, median pay for nearly 2,000 senior managers at Fannie Mae and Freddie Mac exceeded $200,000 that year, and 12 executives got $35.4 million in salary and bonuses in 2009 and 2010. The report also said the FHFA didn't do an adequate job of monitoring pay.
Fannie Mae headquarters are in Washington, D.C., and Freddie Mac is based in McLean, Virginia.
This story has been corrected to remove an incorrect reference to legislation by Sen. Richard Shelby being approved by the Senate Banking Committee.