Fannie Mae and Freddie Mac (the GSEs) each reported positive financial results for the fourth quarter of 2016.  The two have posted nearly uninterrupted quarterly profits, (Freddie Mac had a net loss of $354 million in the first quarter of 2016) since 2012.  Under the conservatorship agreement, net profits are "swept" to Treasury in the form of dividends.  After the expected Q4 dividends, Treasury will have received $78.4 billion more than the GSEs borrowed.

Fannie Mae reported annual net income of $12.3 billion and comprehensive income of $11.7 billion in 2016.  In the fourth quarter income was $5.0 billion and comprehensive income was 4.9 billion.  Income in the third quarter was$3.2 billion and for all of 2015 it was $10.6 billion

Freddie Mac's full-year net income was $7.8 Billion and Comprehensive Income was $7.1 Billion.  The full-year net in 2015 was $5.80 billion.  Fourth quarter comprehensive income come in at $4.86 billion compared to $2.31 billion in the Quarter Three.

Fannie Mae said its net revenues, composed of net interest income and fee and other income, was $6.2 billion for the fourth quarter compared to $5.6 billion in the third quarter and net for the year was $22.3 billion compared with $22.8 billion for all of 2015. Net interest income made up $5.8 billion of the 4th quarter total compared to $5.4 billion in the third quarter.  The increase was due to higher guaranty fee income driven primarily by amortization income. The slight decrease in annual net revenues, $21.3 billion compared to $21.4 billion, was due primarily to lower net interest income from the companies retained mortgage portfolio, almost entirely offset by an increase in guaranty fees.

The company said the continued reduction in its retained mortgage portfolio has meant an increasing portion of its net interest income comes from guaranty fees. This is augmented by the increase in those fees which was implemented in 2012.  The company expects this trend, two-thirds of its 2016 net interest income derived from its guaranty business, will continue.

Single-Family net income was $4.5 billion in the fourth quarter of 2016, compared with $2.7 billion in the third quarter of 2016. The increase in net income in the fourth quarter was driven primarily by a shift to fair value gains, partially offset by a shift to credit-related expense. For the year, the Single-Family business had net income of $10.2 billion, compared with $8.6 billion in 2015. The increase in was driven primarily by a shift to credit-related income.

"Our strong 2016 results reflect a multi-year drive to improve Fannie Mae's business model, strengthen the housing finance system, and deliver innovation and certainty to customers," said Timothy J. Mayopoulos, president and chief executive officer. "We delivered new technologies that reduce risk and cost for our Single-Family customers and help them make the mortgage process simpler, more certain, and easier for borrowers. Our Multifamily business achieved record volume in 2016, and we deepened our commitment to delivering solutions that support affordable and workforce housing. We look forward to another year of progress as we continue to improve our operations and deliver greater value to our partners, the industry, taxpayers, and the housing market."

Freddie Mac said its fourth quarter increase in net income of $2.5 billion was primarily driven by two market-related items:  an estimated $2.0 billion, after-tax, estimated fair value gain as longer term interest rates increased, and a $0.3 billion after-tax gain compared to $0.5 billion in the third quarter as market spreads tightened less quarter-over-quarter.

The company's net interest income was $14.4 billion for all of 2016, a decline of $567 million from full-year 2015.  The company said the change reflects a decline in the balance of the company's investment portfolio, partially offset by an increase in guaranty fee income from its single-family book of business.  That was, in turn, driven by higher amortization of upfront fees as loans were liquidated at a higher rate due to the low interest rate environment and by higher average guarantee fees.

Fourth quarter net interest income was $3.9 billion, an increase of $239 million from the third quarter.  This was also due to higher amortization fees coming through increased liquidations.

Daniel Layton, Freddie Mac's CEO said, "2016 marked Freddie Mac's fifth consecutive year of profitability, reflecting not only an improving economy but also the very successful work we have done to transform the company.  Our single-family business continues to grow, and we were once again the nation's leading multifamily lender. We have the best overall credit quality in nearly a decade.  Additionally, we are the leading innovator in credit risk transfer and the efficient reduction of legacy assets - enabling us to systematically reduce taxpayer exposure to mortgage risks.

At the end of the fourth quarter Fannie Mae's net worth was $6.1 billion and Freddie Mac's was $5.1 billion.  Under the terms of their Preferred Stock Purchase Agreement with the Treasury Department, the two will pay 4th quarter dividends of $5.5 billion and $4.5 billion respectively; their total net worth less a capital reserve which is reduced quarterly.  The capital reserve will be zero beginning on January 1, 2018.

Including the expected 4th quarter dividend payment, Fannie Mae will have paid Treasury $159.9 billion in dividends and Freddie Mac $105.9 billion.  Under Federal Conservatorship the two have drawn $116.1 billion and $71.3 billion respectively from the Treasury, debts that are still outstanding (that puts taxpayers in the black to the tune of $78.4 bln).  Neither has required a draw since the fourth quarter of 2011.