WASHINGTON: Fannie Mae, the mortgage financier seized by US regulators in 2008, will pay the Treasury Department $10.2bn after reporting a sixth consecutive quarterly profit on continued recovery in the housing market.
The government-sponsored enterprise, which is operating under federal conservatorship, had net income of $10.1bn for the three-month period that ended June 30, according to a statement released Thursday. The company’s net worth was $13.2bn, it said.
“We had continued stable revenues and our results were boosted by a significant increase in home prices, 4.1 percent for the quarter,” Fannie Mae President and Chief Executive Officer Timothy J Mayopoulos said.
After its latest payment, the Washington-based company will have sent the Treasury a total of $105bn, compared with the $117.1bn of aid the company has received. Freddie Mac of McLean, Virginia, which reported a $5bn quarterly profit, will have paid about $41bn after drawing $72bn.
Fannie Mae joined a group of investors who authorised Wells Fargo and Deutsche Bank to seek a court order blocking the city of Richmond, California, from seizing mortgages through eminent domain.
“We think this is a very serious issue and we believe the use of eminent domain that’s being proposed in Richmond is an inappropriate use of that power,” said Mayopoulos, whose company could suffer losses if loans in its retained portfolio are among those seized by municipalities to aid borrowers.
The Federal Housing Finance Agency, the US regulator for Fannie Mae and Freddie Mac, said it may direct the government-sponsored enterprises to stop doing business with cities that use the power of eminent domain for that purpose.
Fannie Mae and Freddie Mac were taken over by regulators in September 2008, shortly before the failure of Lehman Brothers and the rescue of American International Group Inc, amid losses that pushed them toward collapse. The companies have returned to profitability as the housing market recovered and they raised fees for loan guarantees.
Net income at Fannie Mae last year exceeded that of companies such as Wal-Mart Stores, General Electric and Berkshire Hathaway, according to data compiled by Bloomberg. Starting this year, the terms of the US-owned companies’ obligation to the government were changed so that they now return to Treasury all profits above a permitted capital reserve and the money isn’t counted as repayment.
Fannie Mae and Freddie Mac, which were created by the federal government before becoming publicly traded companies, buy mortgages from lenders and package them into securities on which they guarantee payments of principal and interest.
Fannie Mae has provided $3.7 trillion in liquidity to the mortgage market since 2009, the company said in the statement.
President Barack Obama on August 6 called for the two companies to be replaced with a government mortgage reinsurer that would sustain losses only in catastrophic circumstances.
Hedge funds including Paulson & Co Inc have been pushing Congress to abandon plans to liquidate the companies as they buy up preferred stock that has been soaring after being considered worthless, according to people with knowledge of the discussions. Some owners of preferred shares have sued the US government, charging that some of the companies’ profits should eventually go to stockholders.
WP-BLOOMBERG
