Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) reported a 97% increase in its second quarter earnings today. The government sponsored enterprise (GSE) said in a statement that its profits soared to $10.1 billion from $5.1 billion in the same period last year. It’s the sixth consecutive quarterly profit for the company, reports Clea Benson of Bloomberg. The mortgage financier, which is under federal conservatorship, has a net worth of $13.2 billion as of June 30.
Fannie Mae close to paying down its bailout fund
Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) CEO Timothy J. Mayopoulos said in a statement that the company will pay $10.2 billion in dividends to the U.S. Treasury in September for the bailout aid. Mayopoulos said solid results were mainly due to the housing market recovery. Home prices increased by 4.1% during the quarter.
After the $10.2 billion payment, Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) will have paid about $105 billion to the Treasury Department for the $117.1 billion in aid it received during the financial crisis. Last quarter, the mortgage insurer paid nearly $60 billion to the government. For the first quarter, the company reported record earnings of $58.7 billion due to accounting gain after recognition of over $50 billion in deferred tax assets, according to Margaret Chadbourn of Reuters.
Yesterday, its smaller sibling McLean, Virginia-based Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) reported a $5 billion profit for the quarter ending June 30. Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) will pay $4.4 billion to the Treasury Department. With this, Freddie Mac would have paid a total of $41 billion. It received $71 billion in federal bailout funds.
Regulatory hurdles before Fannie Mae
U.S. regulators poured in about $188 billion after the collapse of Lehman Brothers to rescue the two mortgage insurers. Under the bailout terms, none of the payments they make to the Treasury go towards paying off the $188 billion rescue fund. After bailing them out, the U.S. government took a controlling stake in both mortgage insurers. Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) are not allowed to repurchase their stake. The two mortgage insurers have permission to hold $3 billion in net worth and send the excess profits to taxpayers.
President Obama said on August 6 that he wants to shut down Fannie Mae/ Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac/ Federal Home Loan Mortgage Corp (OTCBB:FMCC). The government plans to replace them with a mortgage reinsurer that will bear losses only in times of calamity.
