Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) reported its third quarter earnings today, and while FHFA director Mel Watt is preparing for the GSEs’ future role in the mortgage market, its investment portfolio continues to unwind. Fannie Mae had $3.9 billion net income in the third quarter, down from $8.7 billion in 3Q13, but the decline in YTD income is even more striking. Fannie Mae had a net income of $12.9 billion for the first nine months of this year, down from $77.5 billion for the same period last year.
Fannie Mae net income falls sharply from 2013 levels
Last year both Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) had a surge in profits because provisions for credit losses turned to a benefit, but Fannie Mae’s benefit for credit losses is much lower this year, $1.1 billion compared to $2.6 billion in 3Q13. Non-interest income also fell by more than half, to $801 million from $1.8 billion last year, and net investment gains fell to $177 million from $648 million in 3Q13.
Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) will pay a $4 billion dividend to Treasury, bringing total dividend payments to $134.5 billion versus the $117.1 billion total draw after the financial crisis. Fannie Mae’s mortgage portfolio has also continued to shrink, though it is still above the $3 trillion mark.
New Senate Banking Committee chair would like to see GSEs eliminated: Bove
Yesterday, I speculated that we were looking at two years of gridlock over GSE reform, and Rafferty Capital Markets VP of equity research has reached the same conclusion, pointing out that Senator Richard Shelby will become the new head of the Senate Banking Committee. Shelby is seen as an opponent of the Fed’s easy money policies (he voted against Yellen’s confirmation), who is skeptical of Fed activity in general, of the CFPB, and of the GSEs.
But Shelby will only have a two-year term to turn his ideas into law before he has to give the chairmanship to someone else (even if Republicans maintain control after 2016), in what is probably going to be a very unproductive few years.
“ It is unlikely, however, that any meaningful banking legislation is going to be passed or that the Congress will have any say in the ultimate resolution of the GSE structure,” Bove writes.