Fannie Mae’s Q3 Profit Half of Q2 Returns

Fannie Mae reported $2 billion in net income and $2.2 billion in comprehensive income for the third quarter, a profit but still a hefty drop from the second quarter’s net income of $4.6 billion and comprehensive income of $4.4 billion. The government-sponsored enterprise blamed its third quarter result on “fair value losses … due primarily to decreases in longer-term interest rates negatively impacting the value of the company.”
Fannie Mae emphasized its positive net worth of $4 billion as of Sept. 30, which resulted in a dividend obligation to Treasury of $2.2 billion, which it expects to pay in December.
Fannie Mae’s desultory third quarter results follow Tuesday’s disastrous numbers from Freddie Mac, which reported a net loss of $475 million for the third quarter, down substantially from the $4.2 billion in net income for the second quarter. Freddie Mac also a comprehensive income of $501 million for the third quarter, far below the $3.9 billion level from the second quarter.
In a statement announcing its third quarter results, Fannie Mae President and CEO Timothy J. Mayopoulos conspicuously avoided any mention of the decline in profits.
“I am proud of Fannie Mae’s leadership in bringing positive change to the housing finance system,” Mayopoulos said. “We are delivering innovative technology to lenders to help them originate loans with greater certainty and deficiency, while we continue to transfer a significant amount of credit risk to private capital to better protect taxpayers. Our strong financial results punctuate the ongoing improvements we have made to give our partners the clarity they need to lend with confidence and help more families get a mortgage they can afford.”
While neither Freddie Mac nor Fannie Mae are in need of a Treasury draw at this time, Federal Housing Finance Agency (FHFA) Director Mel Watt created more than a few jitters earlier this week when he stated that such an action may be on the horizon.
“Volatility in interest rates coupled with a capital buffer that will decline to zero in 2018 under the terms of the senior preferred stock purchase agreements with Treasury will likely make both Enterprises increasingly susceptible to the possibility of quarterly losses that could result in draws going forward,” Watt said in a statement.