Fannie Mae joined Freddie Mac in showing significant improvement in its financial condition during the first quarter of 2012.  The company reported today that it had a net income of $2.7 billion during the first quarter compared to a net loss of 2.4 billion in the fourth quarter of 2011 and $6.5 billion in the first quarter last year. 

As a result of these improved numbers the company, for the first time since it was placed under government conservatorship in August 2008, will not be requesting funding from the U.S. Treasury and will be paying Treasury a first-quarter dividend of $2.8 billion.

Fannie Mae said that improvement in its results were largely due to lower credit-related expenses resulting from a less significant decline in home prices, a drop in its inventory of single-family owned real estate (REO) and lower single-family delinquency rates. 

The company's loss reserves decreased to $74.6 billion as of March 31 from 76.9 billion at the end of the fourth quarter of 2011.  The company expects that the reserves to cover credit losses on its pre-2009 legacy book of business have reached their peak.

Fannie Mae's net worth of $268 million at the end of the quarter reflects the company's total comprehensive income of $3.1 billion, partially offset by its $2.8 billion payment to Treasury in senior preferred stock dividends.  Since the conservatorship began Fannie has drawn $116.1 in Treasury funds and has paid Treasury $22.6 through dividends.

The financial summary shows that Fannie Mae had net interest income of $5.2 billion compared to $4.2 billion in Quarter 4 and net revenues of $5.6 billion, up from $4.5 billion.  Total credit-related expenses dropped from $5.5 billion in the previous quarter to $2.3 billion.

Susan McFarland, executive vice president of Fannie Mae and chief financial officer said "We expect our financial results for 2012 to be significantly better than 2011.  Our credit performance is headed in the right direction with significant improvement since 2009, and we expect that the reserves we have built to cover future credit losses on the pre-2009 legacy book of business have reached their peak.  As our serious delinquency rate declines and home prices stabilize, we expect to reduce our reserves, which combined with revenue from our high-quality new book of business, will drive our future results.

During the first quarter of 2012 the company signed off on 46,671 loan modifications compared to 51,936 in the previous quarter.  These included both HAMP and the company's own modifications.  There were 8,864 repayment plays or forbearance agreements put in place, up from 8,517 and 22,213 short sales and deeds-in-lieu of foreclosure, virtually unchanged from the previous quarter.

The company acquired 47,700 single family properties in the first quarter compared to 47,256 in the fourth quarter and disposed of 52,071 single-family REO.  As of the end of March the REO inventory stood at 114,157 units, down from 118,528 units at the end of the year.  The carrying value of the properties is valued at $9.7 billion, unchanged from the fourth quarter but about half the value one year earlier. 

The foreclosure rate during the quarter was 1.07 percent compared to 1.13 percent for all of 2011.