Politics & MoneyMortgage

Fannie Mae 3Q net income more than cut in half to $2B

Posts a $2.2B dividend obligation to Treasury

Fannie Mae recorded a third-quarter 2015 net income of $2 billion and comprehensive income of $2.2 billion.

The government-sponsored enterprise also reported a positive net worth of $4 billion as of Sept. 30, 2015, resulting in a dividend obligation to Treasury of $2.2 billion, which the company expects to pay in December 2015.

With the expected December dividend payment, Fannie will have paid a total of $144.8 billion in dividends to Treasury. Dividend payments do not reduce prior Treasury draws, which total $116.1 billion since 2008.

This is down compared to the second quarter of 2015, which posted net income of $4.6 billion and comprehensive income of $4.4 billion.

The decline in net income is primarily due to fair value losses, partially offset by credit-related income, in the third quarter of 2015.

“I am proud of Fannie Mae’s leadership in bringing positive change to the housing finance system. We are delivering innovative technology to lenders to help them originate loans with greater certainty and efficiency, while we continue to transfer a significant amount of credit risk to private capital to better protect taxpayers,” said Timothy Mayopoulos, president and CEO.

“Our strong financial results punctuate the ongoing improvements we have made to give our partners the clarity they need to lend with confidence and help more families get a mortgage they can afford,” added Mayopoulos.

As for its single-family business, Fannie reported net income of $2 billion in the third quarter of 2015, compared with $626 million in the second quarter of 2015. Net income in the third quarter of 2015 was driven primarily by guaranty fee income and credit-related income.

Additionally, net interest income, which includes guaranty fee revenue, was $5.6 billion for the third quarter of 2015 compared with $5.7 billion for the second quarter of 2015.

The growth was driven by guaranty fee revenue, including amortization income from prepayments, and interest income earned on mortgage assets in the company’s retained mortgage portfolio.

Net fair value losses were $2.6 billion in the third quarter of 2015, a significant drop from gains of $2.6 billion in the second quarter of 2015. The drop was attributed to decreases in longer-term interest rates negatively impacting the value of the company’s risk management derivatives.

Fannie has increased the role of private capital in the mortgage market and reduced taxpayer risk through its Connecticut Avenue Securities and Credit Insurance Risk Transfer transactions. Since October 2013, these transactions have transferred to the private market a significant portion of the credit risk on single-family mortgage loans with an unpaid principal balance of approximately $464 billion.

These results came in a lot more positive compared to Freddie Mac, which recorded a net loss of $475 million for the third quarter of 2015, significantly down compared to net income of $4.2 billion for the second quarter of 2015.

“For the first time in four years, Freddie Mac had a net loss in the most recent quarter,” said Donald Layton, CEO, about it’s results. “This $0.5 billion loss was caused mainly by the accounting associated with our use of derivatives, whereby the derivatives are marked-to market but many of the assets and liabilities being hedged are not.”

3d rendering of a row of luxury townhouses along a street

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