Fannie Mae and Freddie Mac brought in a combined net income of $6 billion in the third quarter, rising 20% over the government-sponsored enterprises’ net income of $5 billion in the second quarter, the Federal Housing Finance Agency reported in its Quarterly Performance Report of the Housing GSEs.

The increase was primarily driven by proceeds from private-label mortgage-related securities settlements, which totaled $1.7 billion in the third quarter, the FHFA said.

According to the FHFA report, Fannie received $500 million in pre-tax income from MBS settlements in the third quarter, while Freddie received $1.2 billion in pre-tax income.

The FHFA also said that Fannie and Freddie’s earnings were aided by rising home prices, albeit by a smaller amount than in the second quarter, and a continued reduction in the number of delinquent loans guaranteed by the GSEs.

According to the FHFA report, the GSEs' delinquent loan counts declined by 5% in the third quarter, falling to 549,000 from 577,000 in the second quarter.

Since Sept. 30, 2013, the number of seriously delinquent loans at the GSEs has declined by 24%, or approximately 175,000 loans.

The FHFA also reported that rising home prices helped to reduce expected defaults and expected credit losses on loans guaranteed by the GSEs, particularly in those states with the highest severity levels including California, Florida, and Nevada.

Additionally, the quality of the GSEs’ portfolio of loans continued to improve as delinquencies fell on loans acquired prior to 2009, and the number of new loans acquired since 2009 with stronger credit characteristics continued to increase.

As a result of these factors, the GSEs loan loss reserves were lowered by $2.5 billion in the third quarter.

In total, the GSEs have now reported net income of $20.4 billion in the first three quarters of 2014. Proceeds from MBS settlements contributed $4.8 billion to Fannie Mae’s income and $6.1 billion to Freddie Mac’s income.

Also included in the FHFA report is a look at the amount of mortgage-backed securities that the GSEs issued in the first nine months of 2014. 

“The Enterprises and Ginnie Mae continue to account for essentially all issuances of mortgage-backed securities,” the FHFA said in its report.

In the first nine months of 2014, the GSEs accounted for $488 billion or 69% of MBS issuance volume, down considerably from $1,027 billion or 77% in the first nine months of 2013, the FHFA said.

The decrease in the GSEs’ percent of MBS issuance volume was offset by increased Ginnie Mae MBS issuance levels, which increased to 30% for the first nine months of 2014 compared to 23% for the first nine months of 2013.