Fannie, Freddie report profitable quarter

November 11, 2012

Mortgage finance giants Fannie Mae and Freddie Mac reported billions of dollars in profits during the third quarter as improvements in the country’s housing market helped boost home prices and cut down on delinquent loans.

Fannie Mae said it earned $1.8 billion between July and September, compared with a loss of $5.1 billion in the same period last year. At Freddie Mac, profits totaled $2.9 billion during the third quarter, up from a $4.4 billion loss in 2011.

“We are seeing signs of sustained improvement in housing,” Timothy Mayopoulos, president and chief executive of Fannie Mae, said in a statement. “Our financial condition has improved markedly.”

The two government-sponsored entities, which own or guarantee about half of the nation’s loans, have taken a beating in recent years. The 2008 collapse of the housing market sent Fannie Mae and Freddie Mac into a tailspin. Since then, the firms have been put into conservatorship by the federal government, and they have been given more than $190 billion in taxpayer-funded bailout money.

The mortgage finance companies are still wrestling with troubled loans. But both reported a decline in losses from delinquent payments and defaults, known as credit losses, during the third quarter.

“Our inventory of delinquent loans is at the lowest level in two years and our higher quality new book of business now comprises 60 percent of our portfolio,” said Donald H. Layton, chief executive of Freddie Mac.

As of last summer, Fannie and Freddie are required to hand over any profits to the federal government. So far Fannie Mae has paid back $28.5 billion of the $116 billion in bailout funds it has received, while Freddie Mac has turned over $21.9 billion of $71 billion.

The fate of the two entities is yet to be determined. Both Democrats and Republicans have called for the phasing out of Fannie and Freddie in recent months, but have not agreed on how, and when, that should happen.

24.6%,
30.8%

Percentage of the bailout funds that Fannie Mae and Freddie Mac, respectively, have repaid so far.

Abha Bhattarai covers local banking, retail and hospitality for The Washington Post’s Capital Business section. She has written for The New York Times, The Wall Street Journal, Reuters and the St. Petersburg (Fla.) Times.
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