Mortgage

Fannie posts $10B profit

GSE posts a profit for six consecutive quarters

Housing agency Fannie Mae posted its sixth consecutive quarterly profit, reporting a net income of $10.1 billion in the second period. Despite remaining profitable, the GSE’s earnings fell substantially from the first-quarter when it reported $58 billion in income.

Still, the firm doubled its profit when comparing it to Fannie’s year ago earnings of $5.1 billion.

The GSE expects to pay $10.2 billion to taxpayers as a dividend.

"Much of current GSE 'profit' is the reversal of earlier accruals," explained Jim Vogel an analyst at FTN Financial, "which kinda means the original losses that caused great outrage weren't necessarily that big to begin with."

The enterprise attributes its strong second-quarter results to stable revenue, rising home prices and a decline in loss reserves.

The government-sponsored enterprise has not received Treasury funds, or draws, since the first quarter of 2012. Instead, the GSE’s senior preferred stock purchase agreement with the Treasury has allowed it to raise enough capital and liquidity to satisfy the agency’s needs and support the U.S. housing market.

“For periods through June 30, 2013, Fannie Mae has requested cumulative draws totaling $116.1 billion and paid $95.0 billion in dividends to Treasury,” Fannie noted. “Under the senior preferred stock purchase agreement, the payment of dividends cannot be used to offset prior draws. As a result, Treasury maintains a liquidation preference of $117.1 billion on the company’s senior preferred stock.”

Fannie continues to refi eligible borrowers. The GSE’s Refi Plus initiative, a program that aids Fannie borrowers with refinancings, ended up bringing 313,000 new loan’s into the agency’s fold.

On average, borrowers refinancing through Refi Plus were able to reduce their monthly payments by $234.

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