Fannie Mae and Freddie Mac showed few signs of financial improvement in the first quarter and more evidence of their fragility and reliance on home prices, analysts said. Still, Freddie reported a profit in the quarter and did not request any funds from the Treasury Department for just the fourth time since it entered conservatorship in 2008. But Anthony Sanders, a real estate finance professor at George Mason University, said the smaller of the government-sponsored enterprises is living on the refinancing mortgages it purchased in the past. An article by Sanders on Fannie, Freddie and the Dodd-Frank Act's effects on the secondary market will be featured in the June issue of HousingWire. Click here to subscribe. "The sustainability of this is limited, since eventually all possible refinances will be exhausted," Sanders said. "At that point, its profits will drop unless the housing market comes back." The serious delinquency rate at both GSEs declined during the quarter – to 3.63% for Freddie and 4.27% for Fannie – and the companies pared down nonperforming assets, as well. Freddie reported $124.4 billion in unpaid principal on its nonperforming loans, trimmed from $125.4 billion at the end of last year. And Fannie totaled $254.4 billion in unpaid principal balance on its nonperforming loans, down from $287.4 billion. Jim Vogel at FTN Financial said the cost of reducing the backlog increased three percentage points in the quarter and still-dropping home prices raised loss severities on the loans and properties both GSEs are trying to unload. It was especially painful for Fannie, which reported a loss of $8.7 billion and asked for another $8.5 billion from the Treasury. "After the provision for credit losses averaged just under $5 billion per quarter for the last three quarters, the provision jumped to $11 billion in the first quarter," Vogel said. "On balance, the addition to existing reserves increased $6 billion to adjust to the third quarter in a row of lower home values." For this first quarter, at least, Vogel said bright spots are still hard to find at Fannie. "An initial review has yet to uncover any good news of note other than the decline in non-performing loans," he said. Sanders said even if profits would return to the GSEs and the recent uptick for Freddie continues, it could still be decades for the two firms to pay back the now $164 billion pulled from the Treasury. "Even if the earnings from the first quarter continued, it would take 20 years for Freddie Mac to pay back its debt," Sanders said. "The sad fact is that taxpayers are just going to have to absorb the losses from Fannie and Freddie. Keeping them around would, in the long term, be worse for our economy than just winding them down now and paying their debt." Write to Jon Prior. Follow him on Twitter @JonAPrior.