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Fannie’s Earnings Recover

Fannie mae

[1]Fannie Mae released its Q1 financial statement [1] Thursday. Overall, the news was good for the GSE. Fannie posted a net income of $4.3 billion, after taxes, in Q1. That's up from a $6.5 billion loss and a comprehensive loss of $6.7 billion loss at the end of Q4 2017.

Pre-tax net revenues in the first quarter were $5.4 billion and Fannie's overall comprehensive income was $3.9 billion. This, Fannie reported, was “due to the remeasurement of the company’s deferred tax assets resulting from enactment of tax legislation during the quarter."

The GSE's net worth reflects $3.7 billion received from Treasury [2] in Q1. That's related to Fannie's senior preferred stock purchase agreement with Treasury to eliminate the company’s net worth deficit as of December 31. Fannie expects to pay a $938 million dividend to Treasury by the end of June.

The two primary factors driving the difference between net income in Q1 2018 and net loss in Q4 2017, according to the report, were a $9.9 billion provision for federal income taxes in Q4 “that resulted from the enactment of the Tax Cuts and Jobs Act of 2017” and net fair value gains of $1.0 billion in Q1. The latter were primarily driven by gains on the company’s mortgage commitment and risk management derivatives.

Fannie Mae's President and CEO, Timothy Mayopoulos, reacted optimistically to the company's Q1 numbers.

“Our solid first quarter performance reflects the strength of our underlying business, the benefits of our business model, and our focus on customers,” Mayopoulos said. “We continue to drive advances in the housing finance system, providing our customers with reliable, sustainable, and innovative solutions to address America’s housing needs.”

According to the report, Fannie Mae provided approximately $113 billion in liquidity to the single-family mortgage market in Q1 2018 and was (at 42 percent) the largest issuer of single-family mortgage-related securities in the secondary market.

The GSE also continued to transfer a portion of the credit risk on single-family mortgages. At the end of Q1, $995 billion in single-family mortgages, a third of loans in the company’s single-family conventional guaranty book of business, measured by unpaid principal balance, were covered by a credit risk transfer transaction.

Also, Fannie Mae reported providing more than $11 billion in multifamily financing to help finance 154,000 multifamily units in Q1.