Housing Recovery Boosts Fannie Mae to Record Profit

Housing Recovery Boosts Fannie Mae to Record ProfitsThis may be the biggest indicator of a strong housing recovery yet: U.S.-subsidized Fannie Mae has reported a $17.2 billion profit for 2012, its biggest annual profit ever and its first in six years.
Improving credit results, primarily a drop in serious delinquency rates, helped drive profits. As did an overall increase in home prices and higher sales prices on Fannie Mae-owned properties.
Also injecting $1.3 billion in pre-tax income for 2012 was Fannie’s resolution agreements with Bank of America for loan repurchases and compensatory fees tied to poorly-performing mortgages with Countrywide dating back to 2000.
Fannie Mae also recorded a $7.6 billion profit in the fourth quarter, another record.
The company said it expects to remain profitable for the foreseeable future.
There is also good news for taxpayers, who have subsidized quarterly shortfalls for both Fannie Mae and smaller corporate sibling, Freddie Mac, since late 2008, when both mortgage financing entities became wards of the government at the height of the financial crisis. Both companies were on the verge of collapse as a result of subprime mortgage holdings.
Fannie Mae has now paid back about $35.6 billion in dividends to the Treasury, costing taxpayers about $116 billion for the company’s bailout.
Freddie Mac has drawn a cumulative $71.3 billion in aid from the Treasury, and has already paid back $23.8 billion for the government credit that has kept it afloat.
Fannie and Freddie own or back more than 60 percent of U.S. mortgages.
“Our financial results improved significantly in 2012 and we expect our earnings to remain strong over the next few years,” said Timothy J. Mayopoulos, president and chief executive officer. “We have taken a number of actions since 2009 to manage our legacy book of business, build a healthy new book of business with responsible underwriting standards, price appropriately for risk, and reduce uncertainty by resolving outstanding issues.”
Since 2009, Fannie Mae said it has seen the effects of significantly strengthening its underwriting and eligibility standards, and change its pricing to “promote sustainable homeownership and stability in the housing market.”
As of December 31, 2012, 66 percent of Fannie Mae’s single-family guaranty book of business consisted of loans it had purchased or guaranteed since the beginning of 2009.
Fannie Mae remained the largest single issuer of single-family mortgage-related securities in the secondary market in the fourth quarter of 2012, with an estimated market share of new single-family mortgage-related securities issuances of 48 percent, compared with 54 percent in the fourth quarter of 2011 and 49 percent for all of 2012.
Housing Recovery Boosts Fannie Mae to Record Profits

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