Fannie Mae to Send $2.9 Billion to Treasury as Profit Grows
February 19 2016 - 08:50AM
Dow Jones News
Fannie Mae will send $2.9 billion to the U.S. Treasury
Department in March, as profit grew in its fourth quarter because
of the impact of increased interest rates.
The mortgage-finance company reported a profit of $2.47 billion
for the fourth quarter, up from $1.31 billion a year earlier and
$1.96 billion in the third quarter.
Fannie Mae said the increase was driven by higher long-term
interest rates, which boosted the value of the derivatives it uses
to manage risk. Fannie Mae booked $135 million in fair-value gains
in the quarter, compared with losses of $2.5 billion in the
prior-year period.
Fannie Mae's revenue slipped to $5.3 billion from $5.47 billion
a year earlier.
On Thursday, rival Freddie Mac reported a higher profit for the
fourth quarter and said it would pay a $1.7 billion dividend to the
U.S. Treasury in March. Freddie also cited higher interest rates
for the results.
Fannie and Freddie don't make mortgages. The companies buy loans
from lenders, wrap them into securities and provide guarantees to
make investors whole if the loans default.
The price of their portfolios rise and fall as interest rates
change. They use derivatives in an effort to counteract that
effect, but because of accounting rules, the derivatives can make
large profits or losses appear over short periods.
The higher fourth-quarter results come amid uncertainty over
Fannie and Freddie's futures. The government took control of Fannie
and Freddie through a so-called conservatorship during the
financial crisis in 2008, eventually injecting $187.5 billion into
the companies. The companies now pay nearly all of their profits to
the U.S. Treasury and are required to wind down their capital
buffers over time until they reach zero dollars by 2018.
When the deal was put in place, Congress was considering
housing-finance legislation that would replace Fannie and Freddie
with a new system. However, a bipartisan effort to replace the
companies died in 2014, and legislators in an election year have
shown little willingness to consider that or another bill.
Joe Light contributed to this article.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
(END) Dow Jones Newswires
February 19, 2016 08:35 ET (13:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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