According to reports on Mortgage News Daily, Fannie Mae is reporting net income of $1.8 billion in the third quarter of 2012 from $5.70 billion, which is an improvement from the third quarter of 2011 when the company reported a net loss of $5.1 billion on $5.78 billion in revenue. For the first time in six years the company which has been under the government’s control is expected to report a profit following the $9.7 billion in net income reported this year. It is expected that with the company will be able to pay dividends to the treasury for the $116.1 billion in support from taxpayers through its Treasury draws which it has not needed this year. According to reports by Reuter’s news, another Government Sponsored Entity (GSE) Freddie Mac also reported a $2.9 billion third-quarter profit compared with a year-earlier loss of $4.4 billion. The company said it was making a $1.8 billion dividend payment to the Treasury. Freddie has now given back $21.9 billion in cash dividends, or 31 percent of the total amount it has drawn from the government, and requested $71.3 billion in taxpayer funds.
Reuters reports that the strong performance in the third quarter was boosted by lower credit losses, which fell to $3.5 billion from $4.5 billion a year earlier, and recently rising home prices. In addition, both Fannie Mae and Freddie Mac noted improvements in the performance of loans they purchase from lenders and repackage as securities for investors. The company which is the largest single issuer of single-family mortgage-related securities in the secondary market had an estimated market share of 52 percent in the third quarter, compared with 43 percent in the third quarter of 2011. Fannie Mae also remained a constant source of liquidity in the multifamily market. As of June 30, 2012 the company owned or guaranteed approximately 22 percent of the outstanding debt on multifamily properties
Starting next year, the two companies will be required to turn over all their profits to the Treasury as a dividend payment and shrink their investment portfolios more quickly. For those who have felt that the two mortgage giants should decrease their role in the real estate market, this is a welcome sign which follows a recent report that the GSE’s were looking to work with private investors to reduce their involvement in the market.
Michael Hobbs, SRA, LEED GA, PahRoo Appraisal & Consultancy