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Fannie to Request Funds from Treasury on Loss

After-tax losses at the Federal National Mortgage Association will result in a request for funding from the Department of the Treasury. Single-family refinance volume sank last year.

During the 12 months that concluded on Dec. 31, 2017, pre-tax income was $18.4 billion, according to Fannie Mae’s fourth-quarter earnings report.

There was hardly any difference in the Washington-based company’s earnings when compared to $18.3 billion in pre-tax income for the prior annual period.

But after income taxes, Fannie experienced a $6.5 billion loss during just the fourth quarter of last year. The loss was fueled by
a $9.9 billion provision for federal income taxes from the re-measurement of deferred tax assets resulting from the passage of the Tax Cuts and Jobs Act.

The report said that Fannie provided $570 billion in liquidity to the mortgage market last year, not as much as the $637 billion previously reported for 2016.

As a result of its activities, liquidity was provided for around 2.970 million housing units during all of 2017, fewer than 3.247 million the preceding year.

Roughly $500 billion of last year’s liquidity went to finance 2.200 million single-family transactions. Single-family volume fell
from 2.523 million in 2016. The 1.200 million single-family purchase transactions in 2017 were up from 1.122 million the prior year, but the 1.000 million refinances sank from 1.401 million during 2016.

The government-controlled enterprise said it “was the largest issuer of single-family mortgage-related securities in the secondary market in the fourth quarter and full year of 2017. The company’s estimated market share of new single-family mortgage-related securities issuances was 39 percent for full-year 2017 and 37 percent for the fourth quarter of 2017.”

Multifamily financing provided by Fannie during 2017 exceeded $67 billion for 770,000 multifamily units — record annual volume for its Delegated Underwriting and Servicing program.

Following the Federal Housing Finance Agency’s December 2017 agreement with the Treasury — which allows Fannie’s minimum capital reserve to be raised to $3.0 billion and cuts the fourth-quarter 2017 dividend by $2.4 billion — a request will be sent to the Treasury to cover a $3.7 billion net-worth deficit.

Since it was first forced into conservancy in 2008, Fannie has received $119.8 billion from the Treasury and paid out $166.4 billion in dividends.

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