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Record Earnings, Improved Performance at Fannie

Q1 pre-tax income nearly triples from year earlier

May 9, 2013

By Mortgage Daily staff

Thirty-day delinquency at Fannie Mae continued lower for the ninth consecutive quarter as earnings soared to the highest level on record. The company made progress on some of its litigation, and now that Bank of America Corp. has settled it repurchases requests -- outstanding requests have plummeted. The secondary lender reported who its biggest servicers and mortgage insurers are.

The Washington, D.C.-based company reported $221.865 billion in issuance of single-family mortgage-backed securities during the first quarter, more than the $196.755 billion in residential issuance during the comparable period in 2012.

First-quarter 2013 multifamily new business was $8.216 billion, rising from $7.159 billion in the same three-month period last year.

Multifamily issuances by Fannie rose to $9.074 billion from $8.851 billion a year earlier.

Around 22 percent of all multifamily debt was guaranteed or owned by Fannie as of Dec. 31, 2012, according to the report.

This year's activity at the government-controlled enterprise financed around 1.0 million single-family conventional loans and roughly 143,000 multifamily units.

Wells Fargo Bank, N.A., and its affiliates serviced around 18 percent of Fannie's single-family guaranty book of business as of March 31, the biggest share of any servicer.

Bank of America, N.A., and JPMorgan Chase Bank, N.A., each serviced more than 10 percent of Fannie's residential book of business.

Delinquency of at least 30 days on Fannie's single-family conventional loans was 5.27 percent as of March 31.

The past-due rate fell from 5.91 percent three months earlier and 6.04 percent a year earlier.

The most recent rate reflected a 30-59-day rate of 1.72 percent, a 60-to-89 rate of 0.53 percent and a 3.02 percent 90-plus-day rate.

"Our single-family serious delinquency rate has decreased each quarter since the first quarter of 2010," the report stated. "The decrease in our serious delinquency rate is primarily the result of home retention solutions, foreclosure alternatives and completed foreclosures, as well as our acquisition of loans with stronger credit profiles since the beginning of 2009."

The single-family foreclosure rate was 0.89 percent as of the end of the first quarter, improving from 1.07 percent as of the same date in 2012.

Guaranty fees collected on single-family loans in the first quarter were 54.4 basis points, soaring from the 28.9 BPS in the first quarter of 2012.

On multifamily loans, guaranty fees climbed to 56.6 BPS from 49.6 BPS in the year-earlier period.

Wells Fargo was responsible for servicing more than 10 percent of Fannie's multifamily book of business as of the end of March, making it the biggest multifamily servicer for Fannie.

Repurchase demands outstanding finished the first quarter at $4.062 billion, sinking from $12.153 billion a year prior mostly as a result of a settlement with BofA. During the most recent period, $12.499 billion in repurchase requests were collected, another $9.103 billion were resolved and $0.257 billion were canceled.

CitiMortgage has $0.887 billion in repurchase requests outstanding from Fannie, more than any other seller-servicer. Wells Fargo's $0.678 billion was close behind, then $0.561 billion at JPMorgan, $0.392 billion at BofA and $0.366 billion at SunTrust Bank Inc.

Mortgage Guaranty Insurance Corp. was Fannie's biggest mortgage insurer as of March 31 with at total of $19.962 billion of risk in force.

Radian Guaranty Inc. was close behind with $18.781 billion risk in force, which represents the maximum potential loss recovery. No. 3 was United Guaranty Residential Insurance Co., where $17.868 billion in risk was in force.

A settlement was reached on April 10 In re Fannie Mae Securities Litigation, a 2004 consolidated class action lawsuit pending in U.S. District Court for the District of Columbia. The lead plaintiffs in the case are Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio.

On May 2, Fannie, Freddie and the Federal Housing Finance Agency appealed a March 2012 decision by a federal court in Michigan in favor of Michigan counties suing to collect transfer taxes.

"Since these two adverse rulings in Michigan, a number of courts have agreed with our position that we are exempt from these transfer taxes under our charter," Fannie stated. "We do not expect the outcome of these lawsuits to have a material impact on our results of operations or financial condition."

In a lawsuit filed in U.S. District Court for the Southern District of New York against UBS Americas Inc. by the FHFA, the Second Circuit Court of Appeals on April 5 affirmed a decision by the district court by to deny a motion to dismiss.


First-quarter pre-tax earnings of $8.114 billion were the highest in history for Fannie. A year earlier, income was $2.718 billion.

"Our net income in the first quarter of 2013 was driven primarily by the release of the substantial majority of our valuation allowance against our deferred tax assets, which resulted in a benefit for federal income taxes of $50.6 billion in our condensed consolidated statements of operations and comprehensive income," the report said.

Half of the company's staff has been hired since Fannie and rival Freddie Mac were forced into conservatorship in September 2008.

The report indicated that more than 80 percent of senior management was hired or promoted to their current positions since falling under the control of the conservator, FHFA.

Including an estimated $59.4 billion senior preferred stock dividend expected to be paid in the second quarter, Fannie will have paid $95.0 billion in dividends to the Department of the Treasury -- fast approaching the $116.1 billion in draws that Fannie has received from the Treasury since its conservatorship began.

"There is significant uncertainty regarding the future of our company, including how long the company will continue to be in its current form, the extent of our role in the market, what form we will have and what ownership interest, if any, our current common and preferred stockholders will hold in us after the conservatorship is terminated," Fannie said. "We expect this uncertainty to continue."

Fannie Mae profile

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