Record $58.7B profit signals healthier Fannie Mae
WASHINGTON — Fannie Mae said something Thursday that would have been unthinkable a few years ago: It earned a record $58.7 billion profit in the January-March quarter.
And it made clear it's on the cusp of repaying taxpayers for one of the most expensive bailouts of a single company in the financial crisis.
For Fannie, the future hasn't looked this bright since 2006.
More Americans are buying homes. Prices are rising at their fastest rate since the housing bubble burst. Banks are lending only to the most qualified buyers. And many fewer homes are falling into foreclosure.
All of that is a boon to Fannie and its smaller sibling Freddie Mac, which own or guarantee half of all mortgages and back nearly 90 percent of new ones. When people buy homes and nearly all pay their mortgage bills, Fannie and Freddie can't help but make piles of money.
And it's a big reason Fannie decided the time was right this year to capitalize on the tax benefits of the bad loans it absorbed during the crisis.
On Thursday, Fannie said that it applied tax credits it had saved from its losses on delinquent loans suffered during the crisis to its first-quarter earnings.
By applying those credits to its 2013 taxes, Fannie reduced what it owed the government and boosted its profit.
The result: Fannie made more money from January through March than it had in any other quarter. Of the $58.7 billion earned, nearly $51 billion came in part from using the tax credits. That followed $17.2 billion in profit earned last year. Fannie says it expects to stay profitable for “the foreseeable future.”
Nearly all of that money is going back to the government, which rescued Fannie and Freddie during the 2008 financial crisis with a combined $187 billion in taxpayer-funded loans.
Under a federal policy adopted last summer, Fannie and Freddie must turn over their entire net worth above $3 billion in each quarter to the Treasury. Fannie said its net worth in the first quarter was $62.4 billion.
Fannie will pay a dividend of $59.4 billion to the Treasury next month. Once that's paid, Fannie will have repaid $95 billion of the roughly $116 billion it received.
Freddie also is profitable again. It reported Wednesday that it earned $4.6 billion in the first quarter and will pay a dividend of $7 billion to the Treasury next month. Once that's collected, it will have paid back roughly $37 billion of the $71.3 billion it received.
Fannie and Freddie don't directly make loans. Rather, they buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. In doing so, they help make loans available and exert influence over the housing market.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Farmers fear 2nd attack of bird flu
- Toyota to invest $50M in driverless technology with Stanford, MIT partnership
- Bank of New York Mellon computer glitch examined for harm to investors
- Voice-assist technology gets big push toward mainstream vehicles
- Alcoa putting $60M into Upper Burrell tech center expansion
- U.S. adds 173,000 jobs in August, dropping unemployment rate to 5.1 percent
- Is safety impaired when braking makes car shake?
- Trimmer Pilot belies more room, power
- Save big money with comparable model of vehicle
- Jobs report fails to provide clarity to investors
- Fifth Third Bank selling Pittsburgh branches to First National