August 3, 2017 / 2:45 PM / 2 years ago

Fannie books higher quarterly profit, to send $3.1 billion to U.S. Treasury

(Reuters) - Fannie Mae (FNMA.PK), the largest U.S. mortgage guarantor, said on Thursday its net income edged up to $3.2 billion in the second quarter from the previous quarter’s $2.8 billion due to higher credit-related income and investment gains.

FILE PHOTO: Fannie Mae headquarters is seen in Washington, DC, U.S. on February 21, 2014. REUTERS/Kevin Lamarque/File Photo

Fannie said it will pay the U.S. Treasury Department $3.1 billion in dividends, if its regulator the Federal Housing Finance Agency declares this amount before Sept. 30.

Fannie made a $2.8 billion payment in June, bringing its total dividend payment to the Treasury to $162.7 billion.

A year ago, the Washington-based government-sponsored enterprise posted a net income of $2.9 billion.

The government took control of Fannie Mae and Freddie Mac (FMCC.PK) in 2008 in a $187 billion bailout as their investments soured after the U.S. housing market collapse. Their conservatorship requires them to hand over their profits to the Treasury.

At 10:10 a.m. (1410 GMT), Fannie shares were down 1.6 percent at $2.70.

While its overall results improved, Fannie said net interest income fell to $5.0 billion from $5.3 billion in first quarter due to lower guarantee fee income stemming from slower mortgage refinancing activity.

Fannie Mae’s net interest income comes from investment income and guarantee fees on home loans that back mortgage-backed securities.

U.S. refinancing activity has stabilized since earlier this year as mortgage rates remained steady following a spike in late 2016.

U.S. President Donald Trump’s surprise election victory had stoked bets on higher inflation in anticipation of tax reform, looser regulations and infrastructure spending. Investors have largely reversed those bets as few of Trump’s proposed policies have materialized.

Home sales meanwhile have been resilient even with a shortage of available supply for sales across the country.

Fannie booked $1.2 billion in credit-related income in the second quarter, compared with a $179 million loss in the prior quarter.

It marked some loans to “held for sale” from “held for investment” and a drop in actual and projected interest rates. It also had a drop in foreclosed property expense.

The mortgage GSE recorded $385 million in investment gains, compared with a $9 million loss in the first quarter, due to sales of securities and reperforming loans.

Reporting By Richard Leong; Editing by Meredith Mazzilli

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