Skip to main content
Advertising

Originally published May 8, 2014 at 6:47 AM | Page modified May 8, 2014 at 11:18 AM

  • Share:
           
  • Comments (0)
  • Print

Fannie, Freddie post solid earnings for 1Q

Government-controlled mortgage financers Fannie Mae and Freddie Mac posted solid earnings for the January-March period as the U.S. housing market continued to recover. Gains over recent quarters have enabled the companies to fully repay their taxpayer aid after being rescued by the government in 2008.


AP Business Writer

advertising

WASHINGTON —

Government-controlled mortgage financers Fannie Mae and Freddie Mac posted solid earnings for the January-March period as the U.S. housing market continued to recover. Gains over recent quarters have enabled the companies to fully repay their taxpayer aid after being rescued by the government in 2008.

Fannie Mae reported Thursday that it earned $5.3 billion in the first quarter. Fannie will pay a dividend of $5.7 billion to the U.S. Treasury next month. With its previous payments totaling about $121 billion, Fannie has more than fully repaid the $116 billion it received from taxpayers.

Freddie Mac posted net income of $4 billion for the first quarter. Freddie, based in McLean, Virginia, will pay a dividend of $4.5 billion to the government. Freddie already had repaid its full government bailout of $71.3 billion after paying its third-quarter 2013 dividend.

The government rescued Fannie and Freddie at the height of the financial crisis in September 2008 when both veered toward collapse under the weight of losses on risky mortgages. Together the companies received taxpayer aid totaling $187 billion.

The gradual recovery of the housing market has made Fannie and Freddie profitable again. Their repayments of the government loans helped make last year's federal budget deficit the smallest in five years.

Fannie, which is based in the nation's capital, said its first-quarter profit was bolstered by a stable stream of revenue from the fees it charges banks and other mortgage lenders for guaranteeing home loans. The company said it expects "to remain profitable for the foreseeable future."

The $5.3 billion earnings compared with record net income of $58.7 billion in the same period of 2013. The year-ago figure was mainly due to a one-time accounting move that allowed the company to lower its tax liability by applying losses on delinquent mortgages to its 2013 taxes.

Freddie's $4 billion net income compared with $4.6 billion in the first three months of 2013. Earnings were bolstered in the latest period by a decline in mortgage delinquencies, Freddie said.

Under a federal policy, Fannie and Freddie must turn over their entire net worth above $2.4 billion in each quarter to the Treasury. Fannie and Freddie said their net worth in the first quarter was $8.1 billion and $6.9 billion, respectively.

Fannie and Freddie own or guarantee about half of all U.S. mortgages, worth about $5 trillion. Along with other federal agencies, they back roughly 90 percent of new mortgages.

The two companies don't directly make loans to borrowers. They buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. That helps make loans available.

President Barack Obama has proposed a broad overhaul of the U.S. mortgage finance system -- including winding down Fannie and Freddie. The goal is to replace them with a system that would put the private sector, not the government, primarily at risk for the loans.

A plan to phase out Fannie and Freddie, and instead use mainly private insurers to backstop home loans is advancing in Congress. Two key senators reached agreement in March on a plan that was endorsed by the White House.

The plan by Sen. Tim Johnson, D-S.D., chairman of the Banking Committee, and Sen. Mike Crapo of Idaho, the senior Republican on the committee, would create a new government insurance fund. Investors would pay fees in exchange for insurance on mortgage securities they buy. The government would become a last-resort loan guarantor.

Financial "stress tests" conducted by Fannie and Freddie's regulator found that under a severe economic scenario, an additional $190 billion in taxpayer aid could be needed for the two companies. That is a hypothetical situation and "not expected," the Federal Housing Finance Agency said in a report last month.



Want unlimited access to seattletimes.com? Subscribe now!

News where, when and how you want it

Email Icon

Want free career advice? And an iPad Mini?

Want free career advice? And an iPad Mini?

Tell us about your goals and challenges and be considered for a future NWjobs career-makeover story, as well as a chance to win an iPad Mini!

Advertising

Advertising


Advertising
The Seattle Times

The door is closed, but it's not locked.

Take a minute to subscribe and continue to enjoy The Seattle Times for as little as 99 cents a week.

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited seattletimes.com content access is included with most subscriptions.

Subscriber login ►
The Seattle Times

To keep reading, you need a subscription upgrade.

We hope you have enjoyed your complimentary access. For unlimited seattletimes.com access, please upgrade your digital subscription.

Call customer service at 1.800.542.0820 for assistance with your upgrade or questions about your subscriber status.

The Seattle Times

To keep reading, you need a subscription.

We hope you have enjoyed your complimentary access. Subscribe now for unlimited access!

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited seattletimes.com content access is included with most subscriptions.

Activate Subscriber Account ►