Fannie Mae reported net income of $3.9 billion for the third quarter of 2014 and comprehensive income of $4 billion.
The GSE reported a positive net worth of $6.4 billion as of September 30, 2014 resulting in a dividend obligation to Treasury of $4 billion, which the company expects to pay in December 2014.
“This was another solid quarter, with the company reporting strong financial results and continuing to provide much needed liquidity to the market,” said Timothy J. Mayopoulos, president and chief executive officer. “We continue to build a strong book of business based on appropriate standards. We are committed to being our customers’ most valued business partner and delivering the products, services, and tools our customers need to serve the entire market confidently, efficiently, and profitably.”
Fannie Mae’s net income of $3.9 billion and comprehensive income of $4.0 billion for the third quarter of 2014 compares to net income of $3.7 billion and comprehensive income of $3.7 billion for the second quarter of 2014.
Net income in the third quarter of 2014 increased compared with the second quarter of 2014 due primarily to lower fair value losses and an increase in revenues. This increase was partially offset by a decline in credit-related income.
Fannie Mae recognized a provision for federal income taxes of $1.8 billion for the third quarter of 2014, which resulted in an effective tax rate of 31.4%.
Fannie Mae has provided more than $4.3 trillion in liquidity to the mortgage market since 2009, including approximately $123 billion in liquidity in the third quarter of 2014, enabling families to buy, refinance, or rent homes.
Fannie Mae has helped distressed families retain their homes or avoid foreclosure through more than 1.6 million workout solutions since 2009, including approximately 39,000 in the third quarter of 2014.
Net revenues, which consist of net interest income and fee and other income, were $6.0 billion for the third quarter of 2014, compared with $5.3 billion for the second quarter of 2014. Higher net revenues were driven primarily by an increase in income from settlement agreements related to Fannie Mae’s investments in private-label mortgage-related securities and an increase in net interest income.
Net interest income, which includes guaranty fee revenue, was $5.2 billion for the third quarter of 2014, compared with $4.9 billion for the second quarter of 2014. The increase in net interest income compared with the second quarter of 2014 was due primarily to higher amortization income from an increase in prepayments.
An increasing portion of Fannie Mae’s revenues in recent years has been derived from g-fees rather than from interest income earned on the company’s retained mortgage portfolio assets.
This is a result of both the shrinking of the retained mortgage portfolio and the impact of guaranty fee increases. The company recognizes almost all of its guaranty fee revenue in net interest income and the percentage of net interest income derived from guaranty fees on loans underlying Fannie Mae MBS increased to approximately half in the first nine months of 2014, compared with approximately one-third in the first nine months of 2013. The company expects that guaranty fees will continue to account for an increasing portion of its revenues.