Fannie Mae’s profits are down
Fannie Mae recently posted their net income from the third quarter, July-September. They reported a $2 billion profit, down from $3.9 billion a year earlier.
The mortgage giant credited “losses on the investments it uses to hedge against swings in interest rate” for the decline in profit, according to the Associated Press. However, this was the 15th straight profitable quarter for the company.
While Fannie Mae and Freddie Mac both needed considerable rescue loans totaling about $187 billion during the economic crisis, they are becoming profitable again now that the housing market has bounced back.
Fannie said it will pay a dividend of $2.2 billion to the U.S. Treasury next month, but Freddie Mac saw a loss of $450 million in the third quarter and will postpone payment.
Changing interest rates and less finances, under their agreements with the government, “will likely make both enterprises increasingly susceptible to the possibility of quarterly losses that could result in draws” from the Treasury, Mel Watt, director of the Federal Housing Finance Agency, said in a statement Tuesday. The two companies may need further governmental assistance if losses continue.
Fannie Mae and Freddie Mac buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors, making more loans available. Their earnings fluctuate greatly with changing interest rates.
Fannie said they expect to remain profitable in the near future. The Fed may raise interest rates soon, which have remained very low since 208. Fed Chair Janet Yellen said in congressional testimony Wednesday that an interest rate hike in December is a “live possibility” if the economy stays on track. She stressed that Fed policymakers haven’t decided yet.
The Senate advanced a plan to phase out Fannie and Freddie and to instead use private insurers to back home loans.
A Treasury Department spokesman said Tuesday that the prospect of possible losses for Fannie and Freddie “is another reminder that comprehensive housing-finance reform is necessary.”
Fannie Mae’s profits from the last reported quarter at least indicate strength in the real estate market. If you are interested in one of the amazing pieces of real estate we have available in South Florida, contact RE/MAX Paradise today!