Strong Fannie Earnings Bring Taxpayer Recompense Over $100 billion

FanniernMae reported this morning that it posted its sixth consecutivernquarterly profit in the second quarter of 2013 and will pay taxpayersrna $10.2 billion dividend in September. That payment will bring thernaggregate dividents paid to Treasury since the company was placed inrnconservatoryship at $105 billion. </p

Therncompany’s net income was $10.1 billion in the second quarter and therncomprehensive income was $10.3 billion. One year earlier netrncomprehensive income was $5.4 billion. A quarter-over-quarterrncomparison of net comprehensive income is negated by a one-timernbenefit for federal income taxes taken in the first quarter of 2013rnof $31.6 billion. This brought the net compehensive income in thernquarter to $59.3 billion. </p

Therncompany said its strong second quarter showing was driven primarilyrnby continued stable revenues and boosted by a significant increase inrnhome prices during the quarter which resulted in a reduction in therncompany’s loss reserves. The company posted a positive net worth ofrn$13.2 billion at quarter’s end. </p

Netrnrevenues were $6.2 billion in the second quarter compared with $6.9rnbillion in the first and net interest income was $5.7 billion againstrn$6.3 billion. The decrease in net interest income was due to lowerrninterest income from portfolio assets due to a decline in thosernassets and the recognition of $518 million of unamortized cost basisrnadjustments in the first quarter related to loans repurchased by Bankrnof America, partially offset by high income from guaranty fees. Therncompany said as it continues to reduce the size of its retainedrnmortgage portfolio in compliance with its agreement with thernDepartment of the Treasury the revenues generated by these assetsrnwill also decrease. It expects that eventually guaranty fees willrnbecome its primary source of revenues. </p

Credit-relatedrnincome was $5.7 billion in the second quarter compared to $1.2rnbillion in the first quarter due primarily to an increase in homernprices. The company also updated assumptions and data used inrncalculating loss reserves on modified loans which resulted in anrnincremental benefit for credit losses of $2.2 billion.</p

Creditrnlosses were $1.6 billion compared to $1.5 billion in the firstrnquarter. Both quarters were favorably impacted by increases in homernprices and sales prices for disposition ofrnthe companies owned real estate as well as by recoveries from loanrnrepurchase requests. </p

Totalrnloss reserves fell from $60.2 billion to $53.1 billion and total lossrnreserves covered to total nonperforming loans was 23 percent at thernend of the second quarter compared to 25 percent at the end of thernfirst. </p

LikernFreddie Mac, Fannie Mae said that approximately three quarters of itsrnsingle-family guaranty book of business now consists of loans it has<bpurchased or guaranteed since the beginning of 2009. The strongrncredit profile and performance to date lead the company to expectrnthese loans will be profitable over their lifetime and thus exceedrnthe company’s credit losses and administrative costs for them. </p

FanniernMae acquired 36,106 single family REO properties in the secondrnquarter compared with 38,717 in the first quarter and had anrninventory at the end of the quarter of 96,920, down from 101,449 atrnthe end of Q1. The carrying value of the REO was $9.1 billion.</p

Thernserious delinquency rate in the single-family portfolio has declinedrneach quarter since Q1 2010 and was 2.77 percent at the end of therncurrent reporting period compared to 5.47 percent on March 31, 2010. </p

Therncompany said it expects to remain profitable for the foreseeablernfuture but its earnings may vary significantly from quarter tornquarter due to factors such as interest rate changes and rising orrnfalling home prices. In addition to dividendrnpayments, the company said it expects to make substantial federalrnincome tax payments going forward.</p

FanniernMae said it expects to remain profitable for the foreseeable future.rnWhile its revenues are projected to be stable and its annual earningsrnto remain strong over the next few years, its earnings may varyrnsignificantly from quarter to quarter due to many different factors,rnsuch as changes in interest rates or home prices. In addition torndividend payments, the company expects to make substantial federalrnincome tax payments to Treasury going forward.

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