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GSE Profits to Diminish

Another profitable quarter was turned in by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. Future profits are expected to be nowhere near last year’s levels.

Fannie Mae reported first-quarter pre-tax income of $7.9 billion, not as good as $8.3 billion in the previous quarter.

The Washington, D.C.-based firm also fell short of the $8.1 billion it earned prior to taxes in the year-earlier quarter.

After-tax income has been positive for nine consecutive quarters.

Helping to boost Fannie’s income was $4.1 billion collected in legal settlements.

Including a planned dividend payment of $5.7 billion to the Treasury Department, the secondary lender has paid out $126.8 billion in dividends since 2008 — more than the $116.1 billion in bailout funds it has received.

“Fannie Mae expects to remain profitable for the foreseeable future,” the report stated. “While the company expects its annual net income to remain strong over the next few years, the company expects its annual net income to be substantially lower than its net income for 2013.”

Over at Freddie Mac, pre-tax income fell to $5.8 billion from $9.3 billion in the fourth quarter.

“Freddie Mac’s earnings may be volatile due to changes in the fair value of the company’s derivative portfolio, which is used to reduce Freddie Mac’s exposure to interest-rate risk,” the McLean, Va.-based company said in the report.

Settlement proceeds of $4.5 billion contributed to first-quarter earnings.

Freddie plans to pay the Treasury a $4.5 billion dividend, bringing the total-to-date to $86.3 billion.

Treasury draws taken by Freddie amount to $71.3 billion.

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