Not to be Outdone; Fannie Profits Bring Dividend Total to $136.4 Billion

Like Freddie Mac, Fannie Mae has
also reported a profitable fourth quarter of 2014 and a profitable year.  The company had both net and comprehensive income
for the quarter of $1.3 billion and for the year a net of $14.2 billion and comprehensive
income of $14.7 billion.

Comparing the year’s total results
with those of 2013 was, as with Freddie Mac’s revenues, virtually meaningless
as a large portion of the 2013 net of $84 billion and comprehensive income of $84.8
billion resulted from a one-time release of the company’s valuation allowance against its deferred tax assets.

Fannie Mae paid a total
of $20.6 billion in dividends to Treasury in 2014 and expects to pay an additional $1.9 billion in March
2015, fringing the company has paid to $136.4 billion.  Dividends do not reduce prior Treasury draws,
which total $116.1 billion since 2008.

Fannie Mae said its 2014 results were driven by strong revenues from net interest income, income from settlement
agreements related to private-label mortgage-related securities, and credit-related income due
primarily to increasing home prices during the year.
These were partially offset by a provision for federal income taxes and
fair value losses on risk management derivatives due to declines in
longer-term interest rates in 2014.  The company will pay $6.9 billion in federal
income taxes for the year, an effective tax rate of 32.8 percent.

Fannie Mae’s net income of $1.3 billion and comprehensive income of $1.3
billion for the fourth quarter of 2014 compares to net income of $3.9
billion and comprehensive income of $4.0 billion for the third quarter of 2014. Fourth
quarter results were driven by net interest income, partially offset by fair value losses on risk management
derivatives due to declines in longer-term interest rates in the quarter.

Timothy J. Mayopoulos, Fannie
Mae’s president and chief executive officer said, “Fannie Mae had another
strong year of financial performance. We continued
to manage our business effectively,
put the legacy issues from the financial crisis behind us, and implement
innovations to lead the industry toward a sustainable housing
finance system for today and the future.  We are
committed to serving our partners and focused on reducing barriers to lending to
qualified borrowers.”

Net revenues consisting of net
interest income and fee and other income, were $5.5 billion for the fourth
quarter of 2014, compared with $6.0 billion for the third quarter of 2014. For
the year, net revenues were $25.9
billion, compared with $26.3 billion in 2013.

Net interest income, which
includes guaranty fee revenue, was $5.1 billion for the fourth quarter of 2014, compared with $5.2 billion for the
third quarter of 2014. For the year, net interest income was $20.0 billion for 2014, compared with
$22.4 billion for 2013. The decrease in net interest income compared to 2013
was due primarily to lower interest income from retained mortgage portfolio
assets as the size of that portfolio has declined.  This has been partially offset by an increase
in net interest income from guaranty fees.

Fannie Mae said it expects it
will continue to see an increasing portion of net interest income coming from
guaranty fees as a result of both the shrinking portfolio and fee increases. 
The guaranty fee percentage of income from loans underlying Fannie Mae MBS increased to approximately half
in 2014, compared with more than one-third in 2013.

Fee and other income was $323
million for the fourth quarter of 2014, compared with $826 million the previous
quarter.  The decrease was due to third
quarter income from settlement agreements related to private-label mortgage-related
securities sold to Fannie Mae. For the year,
fee and other income was $5.9 billion for 2014, compared with
$3.9 billion for 2013. The increase for the year was again due to private-label
settlement agreements. 

Credit-related income, which
consists of a benefit for credit losses and foreclosed property
expense or income, was $97 million in the fourth
quarter of 2014, compared with $836 million in the third quarter of
2014.  For the year, credit-related income was $3.8 billion, compared
with $11.8 billion in 2013.  Both the quarterly and annual decreases
were attributed
to a slowing in home price growth.  In
addition, 2013 benefited from foreclosed property income primarily due
to the
recognition of income related to compensatory fee agreements.

Net fair value losses were $2.5
billion in the fourth quarter compared to $207 million in the third and $4.8
billion for the year, down from a gain of $3.0 billion in 2013. The company
recorded fair value losses during the quarter and year of due primarily
to declines in longer-term interest rates negatively impacting the value of the
company’s risk management derivatives.

The company’s Single-Family business
segment had net income of $1.6 billion in the fourth quarter of 2014, compared
with $2.1 billion in the third
quarter of 2014 due to lower credit-related income. For the year, the
net income was $8.5 billion, compared with $48.3 billion in 2013. The
decrease in annual net income was due primarily to the release of the
company’s valuation allowance in
2013, as well as a decrease in credit-related income, partially offset by an increase
in guaranty fee income.

Single-Family guaranty fee income
was $11.7 billion in 2014, compared with $10.5 billion in 2013. The Single-Family guaranty book of business was valued
at $2.85 trillion as of December 31, 2014 and September 30, 2014 and $2.89 trillion as of
December 31, 2013.

Single-Family credit-related income was
$94 million in the fourth quarter compared with
$748 million in the third quarter.  For the year, Single-Family credit-related income was
$3.6 billion, compared with $11.2 billion in 2013. The decrease in annual
credit-related income for both quarter and year was due primarily to slower
home price appreciation in 2014 as
compared with 2013.  In addition, 2013
Single-Family credit-related income benefited
from foreclosed property income due primarily to the recognition of
income related to compensatory fee arrangements.

Multifamily net income was $373
million in the fourth quarter of 2014, compared with $384 million the previous quarter. This drop was driven
primarily by changes in credit-related income and the provision for federal income taxes, offset by an increase in gains
from sales of partnership investments. For the year, Multifamily net
income was $1.5 billion, compared with $10.1 billion in 2013.

Multifamily guaranty fee income was $337
million for the fourth quarter of 2014, compared with $332 million for the third quarter of 2014. For the year,
Multifamily guaranty fee income was $1.3
billion in 2014 compared with $1.2 billion in 2013.  The Multifamily guaranty book of business was
$203.3 billion as of December 31,
2014, compared with $200.2 billion as of September 30, 2014 and $200.6 billion
as of December 31, 2013.

Capital Markets net income was $448
million in the fourth quarter of 2014, compared with $2.3 billion in the third quarter of 2014. The group had net income
of $8.1 billion for the year, compared with $27.5 billion for 2013. The group’s
net
interest income was $1.7 billion for the quarter compared with $1.8 billion for the third quarter. For
the year, Capital Markets net interest income
was $7.2 billion compared with $9.8 billion in 2013. Net investment
gains were $1.9 billion for the quarter and $6.4 billion for the year.

Capital Markets retained mortgage
portfolio balance decreased to $413.3 billion as of December 31, 2014, compared with $490.7 billion as of
December 31, 2013, resulting from purchases of $178.3 billion
and liquidations and sales of $255.7 billion during the year.

Fannie Mae
said that 62 percent of its single-family portfolio consists of loans made
since 2009 with another 11 percent made up of loans through the Home Affordable
Refinance Program (HARP.)  Only 19 percent
of loans were originated prior to 2009.   

 The single-family serious delinquency rate for Fannie Mae’s book of business has declined
for 19 consecutive quarters
since the first quarter of 2010, and was 1.89 percent as years end compared
with 5.47 percent as of March 31, 2010. The pace of this decline has slowed in
recent months and the company expects this trend to continue.  The serious delinquency rate and the period of
time that loans remain seriously delinquent continue to be negatively impacted
by the length of time required to complete a foreclosure in some states.

Fannie Mae provided
approximately $434 billion in liquidity to the mortgage market in 2014, including
approximately $128 billion in the fourth quarter, through its purchases
and guarantees of loans.  This resulted in:

  • 887,000
    home purchases in 2014, 243,000 in the fourth quarter.
  • 937,000 mortgage refinancings for the year
    and 264,000 in the fourth quarter.
  • 446,000 units of multifamily housing in
    2014, 157,000 of these in the fourth
    quarter.

The company remained the largest
single issuer of single-family mortgage-related securities in the
secondary
market in the fourth quarter with an estimated market share of new
single-family mortgage-related issuances of 40 percent for
the quarter and year. The company, as of September 30, 2014, also owned
or guaranteed approximately 19 percent of the outstanding debt on
multifamily properties.

Article source: http://www.mortgagenewsdaily.com/02202015_fannie_mae_financials.asp

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