GSEs Report 2018 and Q4 Earnings
February 14, 2019
Fannie Mae and Freddie Mac have reported their respective 2018 and fourth quarter earnings this morning, with each government-sponsored enterprise (GSE) highlighting a vibrancy in the 10th year of their federal conservatorship.
Fannie Mae reported 2018 annual net income of $16 billion and annual comprehensive income of $15.6 billion, up from $2.4 billion in 2017 annual net income and $2.2 billion in 2017 annual comprehensive income. The GSE attributed the dramatic increase in net income to “the absence of a $9.9 billion one-time charge for federal income taxes recorded in 2017 and the lower corporate tax rate in effect as a result of the Tax Cuts and Jobs Act of 2017.”
For the fourth quarter of 2018, Fannie Mae reported net income and comprehensive income of $3.2 billion, down from $4 billion and $3.9 billion in the third quarter. Fannie Mae added that it will pay a $3.2 billion dividend to Treasury by March 31.
“We enjoyed a solid quarter based on a strong credit environment in a business that is driven by guarantee fee income rather than the retained mortgage investment portfolio, which continues to decline,” said Fannie Mae CEO Hugh R. Frater. “The core of our business is helping our customers provide America’s homeowners and renters with the best possible experience. Customers are at the core of everything we do. Looking ahead, we will continue working with our customers and other partners on critical challenges, such as increasing the supply of affordable housing and driving digital transformation of the mortgage industry.”
Freddie Mac reported 2018 net income of $9.2 billion and comprehensive income of $8.6 billion, up from $3.6 billion and $3.1 billion, respectively, from the full-year 2017. The GSE credited its year-over-year increase to “a $5.4 billion write-down of the company's net deferred tax asset resulting from tax reform legislation, partially offset by a $4.5 billion, or $2.9 billion after-tax, benefit from a litigation settlement related to non-agency mortgage-related securities, combined with lower income tax expense due to the reduction in the statutory corporate income tax rate in 2018.”
For the fourth quarter, the GSE’s net income of $1.1 billion and comprehensive income of $1.5 billion was down from $1.6 billion and $1.1 billion, respectively, in the third quarter. Freddie Mac added that it will pay a $1.5 billion dividend to Treasury by March 31.
“Ten years after the financial crisis, Freddie Mac’s transformed business model continues to produce solid financial and business performance, with $8.6 billion of profits this year,” said Freddie Mac CEO Donald H. Layton. “We delivered almost $400 billion of liquidity to the U.S. mortgage markets—with a very strong focus on first-time homebuyers and affordable rentals. And we did it while transferring ever greater amounts of credit risk to the private capital markets and away from taxpayers. We’re serving our customers better every year and delivering good value to the taxpayers who support us during conservatorship. It’s a true success story.”
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