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GSE Earnings Tumble, Single Family Activity Slows

Annual earnings and single-family secondary activity turned lower at both Freddie Mac and Fannie Mae. But multifamily activity held up.

Fannie reported that it financed 887,000 home purchases last year, fewer than the 1.0 million previously reported for 2013. In addition, it provided funding for 937,000 single-family refinances, sinking from the prior year’s 2.6 million.

Fannie claims to be the largest single issuer of single-family mortgage-related securities in the secondary market with a 40 percent market share last year.

At Freddie, 606,000 home purchases were financed in 2014,
climbing from 515,000 the previous year. Refinance volume, however, plunged to 608,000 loans from 1,555,000 loans in 2013.

By dollar volume,
Freddie’s single-family purchases and issuances amounted to $255 billion in 2014, slowing from $423 billion the previous year.

On the commercial real estate side, Fannie said it financed loans responsible for 446,000 multifamily units last year, off from 0.5 million units previously reported for 2013.

Fannie’s share of outstanding multifamily debt was 19 percent as of Sept. 30, 2014.

Over 413,000 rental units were financed by Freddie last year, more than the 388,000 units in 2013.

Freddie’s multifamily purchases and guarantees inched up to $28 billion for all of 2014 from the previous year’s $26 billion.

Before accounting for federal income taxes, Fannie earned $2.1 billion in the fourth quarter, sinking from $5.7 billion three months earlier and $9.3 billion twelve months earlier.

Full-year pre-tax income at Washington-based Fannie tumbled to $21.2 billion from $38.6 billion in 2014.
After-tax net income of $14.2 billion for all of last year
plunged from $84.0 billion in 2013. The decline reflects 2013’s release of its valuation allowance against its deferred tax assets.

Freddie’s pre-tax income fell to $0.2 billion from $3.0 billion and plummeted from
$9.3 billion in the fourth-quarter 2013.

Full-year 2014 pre-tax income at McLean, Va.-based Freddie sank to $11.0 billion from the prior year’s $25.4 billion.

Freddie’s after-tax income tumbled to $7.7 billion last year from $48.7 billion in 2013.

As was the case with Fannie, Freddie said the decline in income reflected the year-earlier release of the deferred tax asset valuation allowance — which in Freddie’s case was $23.3 billion.

Also contributing to Freddie’s year-over-year drop in income
was a shift from derivative gains of $2.6 billion in 2013 to derivative losses of $8.3 billion last year. The deterioration was attributed to declining interest rates during 2014.

Including a $1.9 billion planned dividend payment next month to the Treasury, Fannie will have paid a total of $136.4 billion.

Treasury draws by Fannie since being thrust into conservatorship in September 2008 total $116.1 billion.

Freddie, which has received a cumulative $71.3 billion in Treasury draws, will have paid $91.8 billion in dividends to the Treasury after a planned $0.9 billion payment in March.

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