- By David M. Kinchen
In still another indicator of an improving housing market, Fannie Mae (FNMA/OTC) on Tuesday, April 2, 2013 reported annual net income of $17.2 billion for 2012 and quarterly net income of $7.6 billion for the fourth quarter of 2012, compared with a net loss of $16.9 billion for 2011.
Fannie Mae’s news release added that “the improvement in the company’s full-year and quarterly net income was due primarily to improved credit results driven by a decline in serious delinquency rates, an increase in home prices, higher sales prices on Fannie Mae-owned properties, and the company’s resolution agreements with Bank of America.
As The Wall Street Journal noted in a paywall-protected report, Fannie Mae has been benefiting from “the housing market’s turnaround and sustained declines in the number of soured home loans. … Fannie is [also] losing less money on homes it sells through foreclosure as prices in many markets rise.”
The news release from Fannie Mae added: “As a result of actions to strengthen its financial performance and continued improvement in the housing market, Fannie Mae’s financial results improved significantly in 2012 and the company expects to remain profitable for the foreseeable future. Based on analysis of all relevant factors, Fannie Mae determined that the valuation allowance on the company’s deferred tax assets was still appropriate as of December 31, 2012. The valuation allowance as of December 31, 2012 was $58.9 billion.”
“Our financial results improved significantly in 2012 and we expect our earnings to remain strong over the next few years,” said Timothy J. Mayopoulos, Fannie’s president and chief executive officer. “We have taken a number of actions since 2009 to manage our legacy book of business, build a healthy new book of business with responsible underwriting standards, price appropriately for risk, and reduce uncertainty by resolving outstanding issues. These actions have helped to strengthen our financial performance and to support the housing recovery by enabling families to buy, refinance, or rent a home even during the housing crisis.”
“Solid business fundamentals such as improving performance of our book of business and improvements in the housing market led us to report the largest annual and quarterly net income in the company’s history,” said Susan McFarland, executive vice president and chief financial officer. “We expect to remain profitable for the foreseeable future and return significant value to taxpayers.”
“Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac buy mortgages from lenders and package them into securities on which they guarantee payments of principal and interest,” noted Bloomberg News in a description of the two government sponsored enterprises (GSE). “The two companies have drawn $187.5 billion from Treasury and have sent back more than $60 billion in the form of dividends, which count as a return on the government’s investment and not as a repayment.
“Under the terms of an agreement with Treasury that went into effect this year, the enterprises will be allowed to retain only $3 billion in net worth. Any profits beyond that amount will go to taxpayers.”