The first name of an analyst at Stephens Inc. in Little Rock, Ark., was incorrectly reported yesterday in a Business story about the Federal National Mortgage Association. He is Frank W. Anderson. (Published 1/17/91)

The Federal National Mortgage Association, bucking the downward trend in most real estate related businesses, reported a record $1.17 billion profit last year, a 45 percent jump from 1989's $807.3 million.

Last year was the first in which Fannie Mae has earned more than $1 billion and the fourth straight year of record profit for the giant District-based company. The results announced yesterday work out to $4.49 per share, compared with $3.10 for 1989.

The 10-digit bottom line was also a final triumph for retiring Chairman David O. Maxwell, who took over a decade ago when the company was losing $1 million a day.

"I leave Fannie Mae this month confident that the company's extraordinary financial strength will enable it to serve well American housing and Fannie Mae stockholders in the 1990s... .," Maxwell said in a prepared statement yesterday.

Maxwell's successor, James A. Johnson, takes over Feb. 1.

Fannie Mae, a congressionally chartered, stockholder-owned company, was set up by the government to purchase mortgages from primary lenders. In doing so, it provides the lenders with more money to make more loans, thus making it easier for home buyers to obtain financing.

Company officials described the firm's performance as the payoff for a series of strategies taken by Maxwell during the 1980s.

Timothy Howard, chief financial officer, said Fannie Mae follows a strategy of matching terms on money it borrows to those on mortgages it buys. This allows it to lock in a profitable spread on every loan it owns, he said.

In addition, Fannie Mae continues to expand its mortgage-backed securities business, in which it sells securities backed by loans it owns. These securities help insulate Fannie Mae from interest rate movements while supplying it with a steady stream of fee income.

At the same time, foreclosures and loan write-offs declined during 1990, a development that Howard ascribed to more "disciplined" underwriting of loans.

Analysts agreed.

"They make loans to people who pay them back," said David S. Penn, an analyst at Legg Mason and Co. in Baltimore. "It sounds easy, but a lot of people haven't been able to do it."

And, he said, "they have insulated themselves from interest rates pretty well."

Despite its success, Fannie Mae remains part of an ongoing controversy concerning the government's role in various financial markets. The company, along with such firms as the Student Loan Marketing Association and the Federal Home Loan Mortgage Corp., is a "government-sponsored enterprise" -- a private company set up by the government to serve a public policy goal.

Officials of both the Reagan and Bush administrations have expressed concern from time to time that these enterprises represent a huge liability to the government and would have to be rescued if they collapsed. Administration officials have been talking about seeking legislation to tighten the regulation of these enterprises and strengthen capital requirements.

It "is the biggest issue hanging over them," said David W. Anderson, an analyst with Stephens Inc., an investment bank in Little Rock, Ark.

Anderson said he hoped the questions can be resolved without damaging Fannie Mae because "this is one government project that I would hope they would leave alone because it's working and working quite well."

William R. Maloni of Fannie Mae said three studies of the issue -- one by the Treasury, one by the General Accounting Office and one by the Congressional Budget Office -- are due in April. He said he believes "there are plenty of grounds for agreement on fundamentals" and if Congress -- which he noted has much else to deal with this year -- decides to act, Maloni believes there can be an agreement.

Fannie Mae's stock rose 25 cents yesterday to $34 a share in New York Stock Exchange trading.