Mortgage giant Fannie Mae on Wednesday reported a $2.7 billion profit during the first three months of the year, saying it would not require additional taxpayer aid for the first time since the government seized the troubled firm in 2008.
The company had reported a $2.4 billion loss the previous quarter and a $6.5 billion loss during the same period a year ago.
Fannie Mae attributed its positive numbers largely to improvements in the nation’s housing market, including stabilizing home prices, falling mortgage delinquency rates and brisk sales of foreclosed homes.
In addition, the firm said that it plans to set aside fewer reserves against potential losses as the housing market begins to heal, and it said that it expects its financial results in 2012 to be “significantly better” than last year.
“It’s an indication of what the earnings power of the company is and can be in the future, and an indication that Fannie Mae has the potential to deliver a
lot of value to the taxpayers,”
the firm’s chief financial officer, Susan McFarland, said of the first-quarter results in an interview.
Fannie Mae cleared enough profit during the quarter to make a $2.8 billion dividend payment to the government and did not require another influx of taxpayer funds to stay afloat, the first time that has been the case since the financial crisis.
McFarland said that there is no guarantee the mortgage
giant will not have to ask for more federal aid down the line, but she said that the company seems to be close to turning a corner and is posting solid operating profits on a more consistent basis.
Fannie Mae has received about $116 billion in taxpayer funds since the government put it into conservatorship 3 ½ years ago, while returning about $23 billion to the government
Freddie Mac, which also was rescued by a federal bailout, has received about $72 billion in aid during the same period, while returning about $18 billion to the government.
Freddie Mac last week reported a first-quarter profit of $577 million but said it would request an additional $19 million in taxpayer funds.
Together, Fannie and Freddie own or guarantee a majority of home loans in the United States and have long been a key source of funding for the nation’s mortgage market. Their portfolios amount to about $5 trillion in assets.
Fannie Mae’s first-quarter profits on Wednesday offered the latest sign that the country’s housing market is inching toward recovery — although many local markets remain weak, many homeowners are struggling to keep up with their payments and many foreclosures remain in the pipeline.
The National Association of Realtors reported Wednesday that sales of existing single-family homes continued to improve during the first quarter, with prices rising in roughly half of the nation’s metropolitan areas. Inventories have shrunk to more normal levels in many markets.
In addition, fewer homeowners have been falling into foreclosure. Permits for new housing construction have surged. The confidence level among U.S. home builders has remained at its highest point since 2007, and sales expectations have continued to climb.
If the housing market continues to stabilize or even improve, that could mean significant improvements to Fannie Mae’s bottom line and good news for taxpayers.
“It’s a pretty simple cause and effect,” McFarland said. “If housing gets better, our financial performance gets better."