Fannie Mae in reporting net income of
$1.8 billion in the third quarter of 2012 from $5.70 billion in net revenue
compared to a net loss of $5.1 billion on $5.78 billion in revenue in the third
quarter of 2011. Thus far in 2012 the
company has reported $9.7 billion in net income and expects to post positive
returns for the entire year for the first time since 2006. The company has been operating under federal
conservatorship since September 2008.
The higher net income was the result of
lower credit-related expenses which the company attributed to an increase in
actual and expected home prices, higher sales prices on its real estate owned
(REO) properties, and a decline in fair value losses. Credit related expenses were $2.03 billion
compared to $4.89 billion one year earlier and the company reported comprehensive
income of $2.6 billion
in the third quarter of 2012.
Fannie Mae will be able to pay the
required $2.9 billion dividend to the Department of the Treasury under its
Senior Preferred Stock Agreement without requesting a further draw from
Treasury. The divided is based on the
total liquidation preference of Treasury's stock which remains at $117.1
billion. Through September 30 Fannie Mae
has paid $28.5 billion in cash dividends to Treasury. To date Fannie Mae has received $116.1
billion in support from taxpayers through its Treasury draws. It has not required any support from Treasury
thus far in 2012.
In August the
terms governing the company's dividend obligations on the senior preferred stock were amended
and future dividends will equal the amount,
if any, by which the company's net worth as of the end of the preceding
quarter exceeds an applicable capital reserve
amount. The applicable capital reserve
amount will be $3.0 billion for each quarter of 2013 and will
be reduced by $600 million each
year until it reaches zero in 2018.
are seeing signs of sustained improvement in housing and our actions to support the housing recovery have
generated strong financial
results in 2012,"
said Timothy J. Mayopoulos, president and chief
executive officer. "Fannie Mae's priorities
are well aligned with the public interest. Our financial
condition has improved markedly. We have paid the Treasury $8.7 billion in 2012 and our
expected ability to pay taxpayers is growing. We continue to fund the mortgage market,
in distress, and lay
the foundation for a better
housing finance system."
reported strong revenue for the first nine months of 2012 and expect to report annual net income for
the first time since 2006," said
Susan McFarland, executive vice
president and chief financial
officer. "The improvement in our financial condition was driven primarily
by a substantial reduction in credit expense
due, in large part, to higher home
prices and a reduction in seriously delinquent loans. We continue to focus on foreclosure prevention solutions to reduce delinquencies and to keep homeowners
in their homes."
Thus far in 2012
Fannie Mae has provided funds for 3.4 million loan transaction including
700,000 home purchases, 2.3 million home refinancings and 400,000 units of
multifamily housing. Since January 2, 2009
when it began its first full year in conservatorship the company has provided
approximately $3 trillion in liquidity to the mortgage market.
The company remained the largest single
issuer of single-family mortgage-related securities in the secondary market in the third
quarter of 2012,
with an estimated market
share of 52 percent, compared with 43
percent in the third quarter
2011. Fannie Mae also remained a
constant source of liquidity in the multifamily market.
As of June 30, 2012 (the latest date for which
information is available),
the company owned or guaranteed
approximately 22 percent of the
outstanding debt on multifamily properties.
reports continued improvement in the quality of loans it owns or guarantees and
says that, while it is too early to know how well the single family loans
originated since the beginning of 2009 will ultimately perform, given their
strong credit risk profile and performance to date it expects that these loans will
be profitable over their lifetime and the company's fee income on these loans
will exceed their credit losses and administrative costs.
Single-family conventional loans acquired by Fannie
Mae in the first nine months of 2012 had a weighted average FICO credit score at origination of 761 and
an average original loan-to-value ("LTV")
ratio of 74 percent.
The average original LTV ratio for the company's acquisitions increased in the first
nine months of 2012 because
the company acquired more
loans with higher LTV ratios in that period than in prior periods as changes to the Home
Affordable Refinance Program ("HARP")
The company's total
loss reserves decreased to $66.9 billion as of September 30, 2012 from $76.9 billion as of December 31, 2011
and it expects the trends of stabilizing
home prices and declining
serious delinquency rates will continue, although it expects
serious delinquency rates to decline at a slower pace than in recent
periods. It does not expect
total loss reserves
to increase above $76.9 billion in the foreseeable future. The company
also believes that its credit-related expenses will be significantly lower in 2012 than in 2011 although they could vary
significantly during some periods in the future.
Fannie Mae acquired 41,884
single-family REO properties,
primarily through foreclosure, in the third quarter of 2012, compared
with 43,783 in the second quarter of 2012. As
of September 30, 2012, the company's inventory of single-family
REO properties was 107,225, compared with 109,266 as of June 30, 2012. The
carrying value of the company's single-family REO
was $9.3 billion as of September 30, 2012.
The company's single-family foreclosure rate was 1.01 percent for the first nine months of 2012. This reflects the
annualized number of single-family
properties acquired through foreclosure or
deeds-in-lieu of foreclosure as a percentage of the total number of loans in Fannie Mae's single-family guaranty book of business.