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Fannie Mae posts largest annual gain with $17.2 billion profit

Mortgage giant Fannie Mae reported net income of $17.2 billion for 2012, compared to a net loss of $16.9 billion a year earlier, as a result of establishing a healthy mortgage book of business.

The government-sponsored enterprise also reported a net income of $7.6 billion for the fourth quarter of 2012, compared to net income of $1.8 billion the previous quarter.

The year-over-year increase primarily reflects improved credit results driven by a decline in serious delinquency rates, an increase in home prices, higher sale prices on Fannie Mae-owned properties and the company’s resolution agreements with Bank of America (BAC), the earnings report said.

“Our financial results improved significantly in 2012 and we expect our earnings to remain strong over the next few years,” said Timothy Mayopoulos, president and chief executive officer of Fannie Mae.

He added, “We have taken a number of actions since 2009 to manage our legacy book of business, build a healthy new book of business with responsible underwriting standards, price appropriately for risk, and reduce uncertainty by resolving outstanding issues. These actions have helped to strengthen our financial performance and to support the housing recovery by enabling families to buy, refinance, or rent a home even during the housing crisis.”

“Solid business fundamentals such as improving performance of our book of business and improvements in the housing market led us to report the largest annual and quarterly net income in the company’s history,” added Susan McFarland, executive vice president and chief financial officer of Fannie Mae.

She further stated, “We expect to remain profitable for the foreseeable future and return significant value to taxpayers.”

Fannie Mae provided $3.3 trillion in liquidity to the mortgage market from Jan. 2009 through Dec. 2012, through its purchases and guarantees of loans. This enabled borrowers to complete 9.7 million mortgage refinancings and 2.7 million home purchases.

Meanwhile, the GSE remained the largest issuer of single-family mortgage-backed securities in the secondary market for the fourth quarter of 2012. Fannie Mae’s market share of new single-family MBS issuance was 48% for the quarter and 49% for the year. 

For 2012, the GSE paid $11.6 billion in dividends to the Department of Treasury under the stock agreement between the Enterprise and the agency.

As a result of Fannie Mae’s positive net worth for the year, the GSE did not request a draw from the Treasury.

Comparatively, Fannie Mae reported net income of $1.8 billion for the third quarter of 2012. For the first nine months, the GSE reported a net income of $9.7 billion.

The GSE recorded a comprehensive income of $2.6 billion during the third quarter and as a result, was able to pay back its dividend of $2.9 billion to the Treasury without any draw under its agreement.

The Enterprise was set to report its fourth-quarter financial results on March 18, but missed its deadline due to needing more time to analyze its deferred tax assets, which are unused credits and deductions that can be used to cover future tax bills.

Recently, Interactive Mortgage Advisors placed $828 million of Fannie Mae mortgage servicing portfolio up for grabs.

The loans are newly originated, with six-month season. There is also $15 to $20 million in flow production being sold as part of the deal.

The GSE’s preferred shares also soared to $2.92, reaching the highest level since the month of its bailout, when dividends on notes were suspended, showcasing investor’s confidence in the mortgage-market dominator.

However, Fannie Mae’s gross mortgage portfolio plummeted to a compound annualized rate of 21.4% in January. For the full year of 2012, the GSE’s gross mortgage portfolio totaled about $633 billion, down from $708 billion a year prior.

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