"Another Solid Quarter" -Fannie/Freddie CEOs say in Separate Statements

Both Freddie Macrnand Fannie Mae released third quarter financial results on Thursday.  The government sponsored enterprises (GSEs)rneach reported that their recently completed quarters had been a profitable one,rnalthough not at their earlier record high levels, and that each will be payingrnsubstantial dividends to the U.S. Treasury.</p

Freddie Mac</breported net income of $2.1 billion, the 12^th consecutive quarterrnthe company has posted positive earnings, compared to $1.4 billion in thernsecond quarter of 2014.  Comprehensivernincome was $2.8 billion, up from $1.9 billion in the previous quarter.</p

These improvements were<bpartially offset by arnshift from a $0.6 billion credit benefit inrnthe second quarter to an identical provision for credit losses in thernthird quarter.  This was, the companyrnsaid, due to a slight worsening in lossrnseverity in the recent period whilernthernsecond quarterrnbenefited from severity improvement and mortgagerninsurance recoveries.</p

“It was another solidrnquarter for Freddie Mac, ourrntwelfth straight of profitability,” said FreddiernMac CEO Donald H. Layton.rn”The fundamentals of ourrnbusiness continued to improve,rnand the quarter ended with the lowest single-family seriously delinquent raternin morernthan five years.  Our work tornbecome a more competitive companyrnis bearing fruit in increasedrncustomer satisfaction and market sharernbetween the GSEs. We alsornstrongly delivered on our missionrnto be one of the leadingrnsources of liquidityrnin the market, funding approximately one in four home loans andrnnearly 214,000 units of rental housing in thernfirst nine monthsrnof 2014.</p

Freddie Mac said the post 2008 portionrnof its book of business is now at 58 percent of its single-family creditrnguarantee portfolio and refinances through the Home Affordable RefinancernProgram (HARP) and other relief refinance loans represent another 20rnpercent.   </p

Fannie Mae said its net income in the third quarter of 2014 increased compared to the previous quarterrndue primarily to lower fair value lossesrnand an increase in revenues.rnThis increase was partially offset by a declinernin credit-related income.</p

Net revenues increased to $6.0 billion from $5.3 billion primarilyrnbecause of an increase in the proceeds from settlement agreements from itsrninvestments in private label mortgage related securities and in increase fromrn$4.9 billion to $5.2 billion in net interest income.  The later includes guaranty fee revenue andrnreflects higher amortization income from an increase in prepayments.  </p

The company said an increasing portion of its revenues in recent yearsrnhas been derived from guaranty fees rather than from interest on its retainedrnmortgage portfolio assets.  This isrnbecause of both the shrinking of the retained mortgage portfolio and increasesrnin the guarantee fees.  The company recognizes almost all of its guarantyrnfee revenue in net interestrnincome and the percentage of net interestrnincome derived from guaranty fees on loans underlying Fannie Mae MBS increasedrnto approximately half in the first nine months of 2014, comparedrnwith approximately one-third in the first nine months of 2013. The company expectsrnthat guaranty fees will continue to account for an increasing portion of its revenues.</p

Fannie Mae’s credit-related incomerndeclined from $1.9 billion in the second quarter to $0.8 billion in thernthird.  This decrease was due to a decline in the company’s benefitrnfor credit losses due primarily to a slower rate of home price appreciation compared with the second quarter of 2014.  This was partially offset by an incremental benefit for creditrnlosses for the third quarterrndue to updates made in the quarterrnto the company’s model and assumptions used to estimaternits allowance for loan losses. Also contributing to the decreasernin credit-related incomernwas foreclosed property expensernin the third quarter of 2014, comparedrnwith foreclosed property incomernin the second quarterrnof 2014.</p

 “This was anotherrnsolid quarter, with the company reporting strong financialrnresults and continuing to provide much needed liquidityrnto the market,” said TimothyrnJ. Mayopoulos, presidentrnand chief executive officer. “We continuernto build a strong book of business based on appropriate standards. We are committed to beingrnour customers’ most valued businessrnpartner and delivering the products, services, and tools our customers need to serve the entire market.</p<p

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