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Strong Quarter at Fannie

No taxpayer assistance requested in Q2

Aug. 8, 2012

By MortgageDaily.com staff


Quarterly earnings were so strong at the Federal National Mortgage Association that no taxpayer assistance was requested again. Bank of America Corp. accounts for nearly two thirds of all outstanding repurchase demands from the secondary lender. Fannie Mae reported that it has requested that several investor lawsuits be dismissed.

Previously reported operational data for the Washington, D.C.-based company indicated that second-quarter new business acquisitions were $194.6 billion, falling from $221.4 billion in secondary activity during the first quarter.

First-half 2012 volume reflected 1.8 million loans originated by Fannie's lender customers.

Activity picked up from the same period last year, when new business acquisitions totaled $116.8 billion.

The government-controlled company says that it has funded 2.2 million home-purchase mortgages and 8.1 million refinances since 2009.

Fannie, which claims to be the single largest issuer of mortgage-related securities, said its share of single-family issuance fell to 46 percent from the first quarter's 51 percent share. But its share was up from 43 percent a year earlier.

Residential delinquency of at least 90 days fell to 3.53 percent as of June 30 from 3.67 percent as of March 31. It was the ninth consecutive quarter that home-loan delinquency was lower.

At the same point in 2011, the rate was 4.08 percent.

The delinquency rate on loans originated between 2005 and 2008 was 9.38 percent, while it was only 0.33 percent for loans originated since 2009.

Fannie says that its delinquency rate is "substantially lower than private market levels." This is supported by data from CreditForecast.com, which indicated that the serious delinquency rate was 6.04 percent in June.

Since Jan. 1, 2009, Fannie said it has helped prevent 1.1 million foreclosures. During the first six months of 2012, loan workouts totaled 142,987, including 96,761 home-retention workouts and 46,226 short sales and deeds in lieu of foreclosure.

New multifamily business volume was $13.897 billion in the first six months of this year. First-half 2012 multifamily issuance financed 236,000 units.

Fannie's multifamily book of business finished the second quarter at $196.1 billion. As of March, Fannie said it owned or guaranteed around 21 percent of outstanding debt on multifamily properties.

Fannie disclosed that outstanding repurchase demands totaled $14.576 billion as of June 30. Of the total, $5.948 billion have been outstanding for more than 120 days.

Repurchase demands to Bank of America, N.A., accounted for $9.417 billion of the total. The high volume of repurchase requests for BofA reflects the cozy relationship that existed between BofA-subsidiary Countrywide Financial Corp. and Fannie -- as well as between Countrywide founder Angelo Mozilo and former Fannie chairman and chief executive officer Franklin D. Raines -- during the years leading up to the housing crisis.

The next three counterparties with the biggest outstanding balances were JPMorgan Chase Bank, N.A., with $1.101 billion; CitiMortgage Inc.'s $0.973 billion; and Wells Fargo Bank, N.A.'s, $0.677 billion.

Mortgage Guaranty Insurance Corp. has insured $83.6 billion of Fannie's loans. The next-biggest mortgage insurer was Radian Guaranty Inc. with $67.3 billion insured; then $62.8 billion insured by United Guaranty Residential Insurance Co. and $54.0 billion insured by Genworth Mortgage Insurance Corp.

Second-quarter earnings before income taxes leapt to $5.1 billion from $2.7 billion in the first quarter. Fannie had a $3.0 billion loss in the second quarter of last year.

"The company's continued improvement in financial results in the second quarter of 2012 was almost entirely due to credit-related income, resulting primarily from an improvement in home prices, improved sales prices on the company's real-estate owned properties, and a decline in the company's single-family serious delinquency rate," the report said.

The strong earnings performance left net worth in positive territory -- eliminating the need for taxpayer assistance in the second quarter. No draw was requested in the first quarter either.

Fannie has requested a cumulative total of $116.1 billion in Treasury Department draws since being placed into conservatorship in September 2008. The Treasury has reaped $25.6 billion in cumulative dividend payments through June.

Fannie noted that on April 4, it requested the dismissal of a consolidated amended complaint originally filed on June 22, 2009, by lead plaintiffs Massachusetts Pension Reserves Investment Management Board and Boston Retirement Board (for common shareholders) and Tennessee Consolidated Retirement System. That lawsuit alleges violations of the Securities Act of 1933.

Fannie also filed on April 4 motions to dismiss In re 2008 Fannie Mae ERISA Litigation; Comprehensive Investment Services v. Mudd, et al.; and Smith v. Fannie Mae, et al.

Among several lawsuits over unpaid transfer taxes against Fannie are two being appealed by Fannie in Michigan. On June 29, the plaintiff in one of the Michigan cases filed a motion with the Judicial Panel on Multidistrict Litigation seeking an order transferring all related cases filed as of that date, as well as all subsequently filed related actions, to the U.S. District Court for the Eastern District of Michigan for coordinated or consolidated pretrial proceedings. Fannie said that it has opposed that motion.

"These lawsuits may lead to additional lawsuits relating to the more than thirty states that impose these taxes," a Securities and Exchange filing stated. "We are currently unable to estimate the reasonably possible loss or range of losses arising from these lawsuits given the following factors: (a) taxing authorities may conclude that our charter provides us with an exemption from these taxes, (b) existing opinions from taxing authorities in some jurisdictions may preclude retroactive collection, (c) no plaintiff has demanded a stated amount of damages, and (d) the scope of permissible claims has not yet been determined in any jurisdiction."

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