Thread: Fannie Mae posts record profit for 2012

Fannie Mae posts record profit

By Chris Isidore @CNNMoney April 2, 2013: 12:17 PM ET
Fannie Mae posts most profitable year in 2012.

NEW YORK (CNNMoney)
Mortgage financing giant Fannie Mae Tuesday reported a record profit of $17.2 billion for 2012, a testament to how much the housing market has improved lately.

Just four years ago, the government had to step in and take control of Fannie Mae, which was brought down to its knees by deep losses from foreclosures and plunging home prices after the real estate bubble had burst.


It was the first full year profit reported by the company since 2006, and marked a significant turnaround from the $16.9 billion loss it posted for 2011.
It also means that Fannie Mae is poised to pay tens of billions of dollars in additional dividends to the U.S. Treasury, perhaps as soon as this quarter,in what could turn out to be its largest repayment to date. The government has pumped in $116 billion in bailout funds in its rescue of the company.
Fannie's improvement in results stems directly from a sharp drop in losses on its loan portfolio. That's because of the decline in foreclosures and delinquencies on the mortgages it owns or guarantees.
The company said it expects its "earnings to remain strong over the next few years."
The housing market has enjoyed a significant recovery in the past year, as low mortgage rates and a tight supply of homes has combined to drive up home prices and sales.
Related: Housing to drive economic growth (finally!)
A settlement payout from Bank of America also raised Fannie's 2012 pre-tax income by $1.3 billion. Bank of America (BAC, Fortune 500) agreed to pay the mortgage financier $3.6 billion as part of a settlement over risky mortgages that Countrywide Financial sold Fannie during the housing bubble. Countrywide was subsequently bought by Bank of America.
The 2012 profit was more than twice the company's previous record of $8.1 billion in 2003, at a time when the housing bubble was just starting to inflate. Fannie's $7.6 billion profit in the final three months of the year also represented its best quarter on record.
　
　
http://money.cnn.com/2013/04/02/news/companies/fannie-mae-record-profit/

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Does a Fannie Mae or Freddie Mac Profit Translate to Taxpayers?

Posted: April 2, 2013 at 12:05 pm

If you were as actively monitoring the financial giants as we were during the financial meltdown, you know all about the woes of [COLOR=#668833 !important][COLOR=#668833 !important]Fannie [COLOR=#668833 !important]Mae[/COLOR][/COLOR][/COLOR] (FNMA). So when news came out this morning that the company managed to post a profit, we wanted to take a look. This stock saw a huge run up in recent weeks, only to see its share price come crashing down.
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We were a bit surprised to see a total profit of $17.2 billion for all of 2012 on Tuesday. This compared to a loss of $16.9 billion in 2011. With the number being so large and the first profit in six years, it had to be assumed that there were issues inside the numbers. A recovery in housing and lower and lower problem [COLOR=#668833 !important][COLOR=#668833 !important]loans[/COLOR][/COLOR] were the main culprit.
One quote stood out: the CEO signaling that earnings are now expected to remain strong over the next few years. The next few years?
Behind the earnings was a boost from the large rise in housing prices. The move allowed Fannie Mae (and [COLOR=#668833 !important][COLOR=#668833 !important]Freddie [COLOR=#668833 !important]Mac[/COLOR][/COLOR][/COLOR] for that matter) to set aside much lower reserves against defaults. We have been tracking this with much regularity, but it is nice to see that this came about for the quasi-government agencies that are under conservatorship.
If you read into the outlook lasting a few years, then the translation may be that interest rates have been telegraphed to remain extremely low to Fannie [COLOR=#668833 !important][COLOR=#668833 !important]Mae [COLOR=#668833 !important]and [/COLOR][COLOR=#668833 !important]Freddie [/COLOR][COLOR=#668833 !important]Mac[/COLOR][/COLOR][/COLOR] as well. We have said that there is a conflict of interest in the Federal Reserve’s pegging of low rates or no rates for such a long period. Maybe it is simply nothing more than having to include the Fannie Mae and Freddie Mac as formal obligations.
Fannie Mae shares are up 14% again, at $0.90 against a 52-week trading range of $0.09 to $1.47. We are encouraged to see this, but for some reason we just do not really see Fannie Mae nor Freddie Mac not being kept as likely taxpayer obligations down the road.

Jon C. Ogg


Does a Fannie Mae or Freddie Mac Profit Translate to Taxpayers? - 24/7 Wall St. http://247wallst.com/2013/04/02/does...#ixzz2PLOYh4f8