Mortgage-finance company Fannie Mae will send the U.S. Treasury
Department $4.4 billion in September, as an interest-rate increase
helped drive a 27% rise in its second-quarter profits.
The company said its second-quarter net income grew to $4.64
billion from $3.67 billion in the same quarter of 2014. Helping
profit was a $2.61 billion fair-value gain, while the prior-year
period included a $934 million fair-value loss.
Fannie said the increased interest rate boosted the value of its
risk-management derivatives.
Fannie and peer Freddie Mac were put into a so-called
conservatorship under government control during the 2008 financial
crisis, eventually receiving nearly $188 billion in support from
the U.S. Treasury. In the past few years, the companies have been
immensely profitable, sending the government more than they
took.
Under the current terms of its bailout, the companies must send
nearly all of their profits to the government in the form of
dividends and wind down their capital buffers over time.
After the September payment, Fannie will have sent $142.5
billion to taxpayers.
Fannie Mae doesn't make loans. Instead, it purchases them from
lenders, wraps them into securities and provides investors
guarantees to make them whole if the loans default.
In the latest quarter, net interest income, which includes fees
from backing mortgages, was $5.68 billion, up from $4.9 billion a
year earlier. Guaranty fee revenue again drove growth.
In recent years, a larger portion of Fannie's net interest
income has been made up of guaranty fees, rather than interest
income earned on its retained mortgage portfolio assets. Fannie
said the shift reflects guaranty fee increases implemented in 2012
and shrinking of its retained mortgage portfolio.
Fee and other income grew to $556 million from $383 million in
the prior-year period. Credit-related expense was $1.2 billion in
the quarter, hurt by mortgage interest rate increases, compared
with income of $1.85 billion a year earlier.
Earlier this week, Freddie also reported a sharp gain in
second-quarter profit because of an increase in the value of
derivatives that it uses to hedge its interest-rate risk.
The derivatives gains and losses reflect an accounting mismatch
between how the derivatives and the assets that the derivatives
hedge are valued, and Freddie expects the net effect to be neutral
over time.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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