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Fannie Mae will pay U.S. Treasury $2.9 billion after strong fourth quarter

As with its counterpart Freddie Mac, Fannie Mae posted a strong  profit for the fourth quarter and will pay the  U.S. Treasury $2.9 billion in March, the government-sponsored enterprise reported on Friday

Fannie had a net income of  $2.5 billion and a comprehensive income of $2.3 billion in the fourth quarter, which left the company with positive net worth of $4.1 billion. Of that amount, $1.2 billion will be held back in reserve for 2016 and the rest — or $2.9 billion — is passed on to Treasury's coffers. Overall for 2015, the GSE reported $11 billion in net income and $10.6 billion in comprehensive income, and paid a total of $10.3 billion in dividends to the Treasury.

The GSE attributed much of its gains for the quarter to higher interest rates that affected the value of the derivatives it uses to hedge against interest-rate risk.

Fannie Mae’s loan purchase activity was significantly higher in 2015 than in 2014. Fannie’s single-family loan-purchase volume totaled $471.4 billion for 2015, which was up more than 27 percent compared to 2014.

Fannie’s multifamily volume also rose to $42 billion in 2015, up nearly 45 percent. The GSE said it provided roughly $516 billion in overall liquidity to the mortgage market in 2016, including about $116 billion in the fourth quarter.                                                                                             

Fannie’s net income of $11 billion fell in 2015 from $14.2 billion in 2014. In 2014,  the GSE’s income was bolstered by settlements over bad loans, however.

 Fannie Mae’s capital reserves are scheduled to be wound down to zero in 2018.   Some industry trade groups have called on the Obama Administration and Congress to end the profit sweeps and allow the GSEs to rebuild a capital buffer to avoid future draws on the Treasury. 

CEO Tim Mayopoulos said that Fannie's declining buffer shouldn't pose an imminent threat to the housing market.

"We expect to remain profitable on an annual basis for the foreseeable future," Mayopoulos said during a conference call with reporters. "Nonetheless, there are substantial factors that we do not control, such as changes in interest rates and home prices. These factors can result in significant volatility in our financial results from quarter to quarter  or year to year." 


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