Fannie Mae Expects First Net Annual Profit in Six Years
By: Krista Franks Brock
Fannie Mae has experienced significant improvements in recent months. The GSE reported a $1.8 billion net income for the third quarter of this year, a notable improvement over the $5.1 billion loss reported in the same quarter last year.
The GSE’s regulator, the Federal Housing Finance Agency, stated in its recent annual report, “[N]either company is capable of achieving the purposes established by law without the ongoing financial support provided by the U.S. Department of the Treasury.”
However, Fannie Mae’s third quarter report states the entity will not require a draw from Treasury this quarter. It also did not draw from Treasury last quarter.
“Our financial condition has improved markedly,” stated Timothy J. Mayopoulos, Fannie Mae’s president and CEO.
“We have paid the Treasury $8.7 billion in 2012 and our expected ability to pay taxpayers is growing,” he continued.
In fact, Fannie Mae has incurred a net income of $9.7 billion over the first three quarters of this year, leading the GSE to expect an annual net income for the first time since 2006.
Several factors are contributing to Fannie Mae’s improved circumstances, including declining fair value losses, increasing home prices, and increasing returns on REOs.
The company’s REO inventory is declining. At the end of the third quarter, Fannie Mae held 107,225 REOs, down from 209,266 at the end of June.
Over the third quarter, Fannie acquired 41,884 REOs. The pace of newly acquired REOs appears to be declining. In the second quarter, the GSE acquired 43,783 new REOs.
In all, Fannie Mae’s single-family REO inventory totals $9.3 billion.
Fannie Mae also reported a decline in its single-family delinquency rate for the tenth consecutive quarter. Currently, Fannie’s single-family rate of 3.41 percent is lower than the private market’s.
Addressing those homeowners who are delinquent, Fannie Mae reported 42,000 loan modifications in the third quarter.
Since January 2009, the GSE has completed 839,000 modifications.
Also, since January 2009, Fannie Mae has provided about $3 trillion in liquidity to the mortgage market, ultimately leading to the financing of 8.9 million mortgage refinances, 2.5 million home purchases, and 1.5 million rental units.
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