The American mortgage giant Federal National Mortgage Association (OTCBB:FNMA) will pay the Treasury Department $59.4 billion, after posting a record quarterly profit driven by rising home prices and declining delinquencies.

Fannie Mae

The mortgage finance firm recorded first-quarter pre-tax income of $8.1 billion, and will release a $50.6 billion valuation allowance on deferred tax assets that will enable it to pay dividend to the Treasury Department.

With Federal National Mortgage Association (OTCBB:FNMA)’s net worth totaling $62.4 billion at March 31, 2013, the company’s dividend obligation to Treasury will be $59.4 billion by June 30, 2013.

When this dividend is paid, the total dividends paid by Fannie to the Treasury in return for its 2008 rescue will total $95 billion, against the $117.1 billion in senior preferred stock held by the government.

Citigroup on Fannie Mae

Citigroup Inc (NYSE:C) in its report anticipates the Treasury will see reduced funding needs of $60 billion, which will likely be absorbed by T-bills in the near term. Citi had already expected smaller auction sizes in 2yr, 3yr and 5yr notes starting in 4Q. Citi feels reduced T-bill issuance is likely to put downward pressure on the GC repo rate.

Fannie Mae’s CEO Timothy Mayapoulos said the company continues to take actions to support the housing recovery, providing the market with $3.5 trillion in liquidity since 2009 and helping families refinance more than 10 million mortgages. He however clarified that Fannie’s recent profitability should not be construed as an all-clear signal in the housing market.

Through Federal National Mortgage Association (OTCBB:FNMA)’s Refi Plus initiative, which offers refinancing flexibility to eligible Fannie Mae borrowers and includes HARP, the company acquired approximately 330,000 loans in the first quarter of 2013. Fannie Mae acquired 38,717 single-family REO properties, primarily through foreclosure, in the first quarter of 2013, compared with 41,112 in the fourth quarter of 2012.

Federal National Mortgage Association (OTCBB:FNMA) also outlined its strategic goals such as building a new infrastructure for the secondary mortgage market, gradually contracting the company’s dominant presence in the marketplace while simplifying and shrinking its operations; and maintaining foreclosure prevention activities and credit availability for new and refinanced mortgages.

Fannie Mae’s report comes a day after sister firm Federal Home Loan Mortgage Corp (OTCBB:FMCC) recorded net income of $4.6 billion and said it will pay Treasury a $7 billion dividend for the quarter, but did not release any valuation allowance.

Federal National Mortgage Association (OTCBB:FNMA)’s shares which were de-listed from the NYSE in 2010 along with Freddie, gained 4.9 percent Thursday morning to 95 cents apiece.