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Feb 21 (Reuters) - A U.S. appeals court on Tuesday upheld a dismissal of hedge funds' claims against the U.S. government for seizing the profits of mortgage financiers Fannie Mae and Freddie Mac following their taxpayer bailout.
In early afternoon trading, Fannie Mae shares were down 26 percent at $3.06, while Freddie Mac fell 29 percent to $2.84.
By a 2-1 vote, the U.S. Circuit Court of Appeals for the District of Columbia said a lower court had correctly barred claims that the government overstepped its authority in 2012 by eliminating dividend payouts to various shareholders and requiring the companies to pay an amount equal to their quarterly net worth to the U.S. Treasury.
Fannie Mae and Freddie Mac investors can still pursue breach of contract claims, the appeals court said.
The government seized Fannie Mae and Freddie Mac in September 2008 as mortgage losses mounted, and it put them into a conservatorship under the Federal Housing Finance Agency.
Both companies have since become profitable. According to court papers, they have returned roughly $68 billion more to the government than they drew down during the financial crisis. (Reporting by Nathan Layne in New York; Editing by Lisa Von Ahn)