Fannie/Freddie Post Healthy Profits, Resume Full Dividend Payments

Both of the
two government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which
remain in government receivership ten years after the housing crisis, posted
strong financial results
for the third quarter of this year.  Freddie Mac reported net income of $2.7
billion and comprehensive income of $2.6 billion while Fannie Mae’s comprehensive
and net were both $4.0 billion. 

Freddie
Mac’s results are slightly ahead of those in the second quarter when comprehensive
income was $2.4 billion, but down from the $4.6 billion reported in the third
quarter of 2017.  The company realized
$3.3 in net interest income and $728 million in derivative gains.

The
company said its results reflected continued strong earnings from guarantee
fee income
, which rose from $169 billion in the third quarter of 2017 to $209
billion in the recent period.  Income
from its Multifamily Guarantee Portfolio increased from $184 million to $226 million
over the same period and income from its Capital Markets businesses was also
stable.  The line item for credit losses
increased from a provision of ($716) million to a benefit of $380 million.

The
company’s total guarantee portfolio grew 6 percent to $2.1 trillion.  New single-family originations decreased 6
percent to $231 billion but the company funded more than 992,000 single family
homes and 551,000 multifamily rental units during the first three-quarter of
2018.

Freddie
Mac will pay the entirety of its comprehensive income to the U.S. Treasury as a
dividend, after rebuilding the $3 billion buffer it was allowed to build during
the first and second quarters. The $2.6 billion payment will bring the total paid
the Treasury to $114 billion since being put in conservatorship.

Fannie Mae’s
comprehensive income was down from the $4.6 billion in the previous quarter but
substantially higher than a year earlier when the total was just over $3
billion. However net interest income varied little among the time periods from
the $5.4 billion just reported. The company said three-quarters of that income
in the third quarter derived from the loans underlying its mortgage-backed
securities in consolidated trusts. These primarily generate income through
guaranty fees.

The
company said it provided $122 billion in liquidity to the single family market
in the third quarter.  It estimated its market
share of new single-family mortgage related securities issuances at 40 percent.
It also provided $18.2 billion in multifamily financing during the quarter, covering
206,000 units of housing.  More than 90
percent of the units
the company financed fell into the category of affordable
and workforce housing.

Fannie Mae
has transferred a portion of the mortgage credit risk on single-family
mortgages with an unpaid principal balance of approximately $1.5 trillion at
the time of the transactions since 2013, and approximately 38% of the loans in
the company’s single-family conventional guaranty book of business were covered
by a credit risk transfer transaction as of September 30, 2018.

Fannie Mae
will pay $4.0 billion in dividends to the Treasury, resuming the required payment
of its total comprehensive income after only a partial payment in the second
quarter. This will bring the total paid over the last 10 years to $171.8
billion.

Article source: http://www.mortgagenewsdaily.com/11022018_gse_financial_results.asp

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