Federal National Mortgage Association
) or Fannie Mae reported third-quarter 2013 net income of $8.7
billion, significantly up from $1.8 billion earned in the
year-ago quarter. This was the company's seventh consecutive
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Results benefited from growth in revenues and credit-related
income, partially offset by higher expenses. Further, improving
credit quality and stable liquidity position were the other
Behind the Headlines
Fannie Mae' net revenue came in at $6.3 billion, growing 11.0%
from the prior-year quarter. The rise was driven by increase in
net interest income (up 5.0%) as well as fee and other income (up
Total credit-related income was $3.8 billion compared with
credit-related expense of $2.0 billion in the year-ago quarter.
The improvement was driven by rise in home prices in the quarter;
the recognition of compensatory fees received in relation with
Bank of America Corporation
) compensatory fee agreement; and a fall in the number of
delinquent loans in the company's single-family guaranty book of
Administrative and other non-interest expenses totaled $954
million, up 2.9% from $927 million in the prior-year quarter.
Credit losses, which the company defines as net charge-offs plus
foreclosed property expense, net of the effect of certain
fair-value losses, were $1.1 billion, down 68.6% from $3.5
billion in the year-ago quarter.
As of Sep 30, 2013, Fannie Mae's total loss reserves decreased
28.4% to $48.4 billion.
Since Jan 2009 through Sep 30, 2013, Fannie Mae provided nearly
$3.9 trillion in liquidity to the mortgage market through its
purchases and guarantees of loans. This enabled borrowers to
complete 12.0 million mortgage refinancings and 3.4 million home
purchases, while the bank provided financing for 2.0 million
units of multifamily housing.
Further, Fannie Mae completed more than 37,000 loan modifications
in the said quarter. This brought the total number of loan
modifications completed by the company to nearly 1 million since
As of Sep 30, 2013, cash and cash equivalents were $30.8 billion
compared with $24.7 billion as of Jun 30, 2013. Further, total
mortgage loans were $3.01 trillion, up from $2.98 trillion as of
Jun 30, 2013.
Additionally, Fannie Mae will pay taxpayers $8.6 billion as
dividends in December. Following this payment, the company will
have paid a total of approximately $114 billion as dividends to
Treasury. As of Sep 30, 2013, senior preferred stock outstanding
and held by Treasury was $117.1 billion.
Performance of Other Firms in the Same Industry
Federal Home Loan Mortgage Corporation
) reported third-quarter net income of $30.5 billion, well ahead
of the prior-quarter figure of $5 billion. A benefit for federal
income taxes of $23.9 billion related to valuation allowance
against net deferred tax assets in the reported quarter drove the
Ocwen Financial Corp
) third-quarter net income came in at $67.0 million compared with
$51.4 million in the prior-year quarter. Net income in the
reported quarter included charges for amortization of mortgage
servicing rights associated with acquisition of ResCap and
Fannie Mae continues to support the housing recovery and will
contribute in building a sustainable housing finance system.
While the company expects its annual earnings to remain strong
over the next few years, any decline in interest rates or home
prices could dent its performance going forward.
Fannie Mae currently carries a Zacks Rank #2 (Buy).