Fannie Mae profit soars, posts largest pre-tax quarterly income to-date
Mortgage finance giant Fannie Mae reported first-quarter pre-tax net income of $8.1 billion on Thursday morning, compared to $7.6 billion from the previous quarter, as a result of strong credit results driven by an improving housing market and the enterprise’s resolution agreement with Bank of America.
The enterprise’s first-quarter pre-tax income is the largest to date in the firm’s history, the government-sponsored enterprise said.
In addition, Fannie Mae posted net income of $58.7 billion in the first quarter of 2013, up from $2.7 billion a year earlier. The enterprise's comprehensive income reached $59.3 billion, compared to $3.1 billion in 1Q of 2012.
This quarter-over-quarter increase primarily reflects an increase in home prices, including higher average sales of Fannie Mae-owned properties and a decline in the number of delinquent loans.
"As a result of actions to strengthen its financial performance and continued improvement in the housing market, Fannie Mae’s financial results have improved significantly over the past five quarters," the enterprise stated.
Fannie Mae will pay the U.S. Department of Treasury $59.4 billion in dividends in the second quarter of 2013, which reflects the GSE’s net worth as of March less than $3 billion capital reserves applicable in 2013 under the terms of the senior preferred stock purchase agreement.
In January, Fannie Mae entered into a resolution agreement with Bank of America (BAC) to resolve certain repurchase requests arising from breaches of selling representations and warranties, the GSE explained.
The enterprise provided approximately $3.5 trillion in liquidity to the mortgage market from Jan. 2009 through March 2013 through its purchases and guarantees of loans.
These efforts enabled borrowers to complete 10.6 million mortgage refinancings, 2.9 million home purchases and 1.8 million units of multifamily housing, the report stated.
The GSE said it remained the largest single issuer of single-family mortgage-backed securities in the secondary market for the first quarter of 2013, with an estimated market share of 48%.
Fannie Mae’s total loss reserves decreased to $60.2 billion in Q113, down from $62.1 billion in Q412.
Meanwhile, the GSE’s single-family delinquency rate has declined each quarter since the first quarter of 2010.
The delinquency rate for Q113 was 3.02%, compared with 5.47% Q110.
"This decrease is primarily the result of home retention solutions, foreclosure alternatives, and completed foreclosures, as well as the company’s acquisition of loans with stronger credit profiles since the beginning of 2009," the GSE stated.
Fannie provided $3.3 trillion in liquidity to the mortgage market from Jan. 2009 through Dec. 2012, through its purchases and guarantees of loans.
Recently, the Federal Housing Finance Agency announced it's pulling back on the loans that Fannie Mae can purchase, noting that beginning at the start of next year, the GSEs will no longer purchase a mortgage that is subject to the ability-to-repay rule if it's not fully amortizing, has a loan term longer than 30 years or includes points and fees in excess of 3% of the total loan amount.
The GSE also introduced a default-servicing tool for servicers in recent weeks.
The tech solution links into Fannie’s Desktop Underwriter for originations, allowing servicers to work faster and more efficiently while trying to save homeowners’ properties from foreclosure.
Fannie Mae continues to meet FHFA's goal of shrinking the housing agency's mortgage portfolio. The enterprise witnessed its portfolio shrink to a compound annualized rate of 12.2% in March.
The book of mortgage business continued to decrease at a compound annualized rate of 1.5% last month, down from 1.75% in February.