GSEs Continue Financial Winning Streaks
Freddie Mac and Fannie Mae (the GSEs) reported solid financial results for both the fourth quarter and the entirety of the 2018 fiscal year on Thursday. The annual income was higher for both GSEs, although each posted a decrease quarter-over-quarter.
Fannie Mae's total comprehensive income for the fourth quarter was $3.2 billion compared to $4.0 billion in the third quarter, and it reported a $16.0 billion total for the year. Because of ramifications from the 2017 tax act, its comprehensive income for the 2017 year was only $2.6 billion.
Freddie Mac's total comprehensive income for the year was $8.6 billion compared to $5.6 billion in 2017 (it too had unusually high tax obligations that year.) For the fourth quarter comprehensive income dropped from $2.6 billion to $1.5 billion.
Fannie Mae posted net interest income of $21.0 billion for the year and $5.0 billion in the fourth quarter and $979 million and $149 million respectively in fee and other income. Expenses were $1.3 billion and $307 million for the two periods.
The company said it expects to pay a $3.2 billion dividend to Treasury by March 31, 2019. Through the fourth quarter of 2018, the company has paid $175.8 billion in dividends to Treasury.
Fannie Mae provided approximately $512 billion in liquidity to the mortgage market in 2018 and was the largest issuer of single-family mortgage-related securities in the secondary market with a 39 percent market share for the full year and 37 percent in the fourth quarter.
Fannie Mae completed its first Connecticut Avenue Securities® (CAS) offering under a Real Estate Mortgage Investment Conduit (CAS REMICTM) structure in November 2018. This new structure achieves insurance accounting treatment for CAS, aligning the timing of the recognition of CAS benefits with credit losses. The company says the structure is designed to expand the potential investor base for mortgage backed securities (MBS) and limit investor exposure to Fannie Mae counterparty risk, without disrupting the To-Be-Announced (TBA) MBS market.
Freddie Mac had net interest income of $12.0 billion for the year and $2.7 billion for the fourth quarter and non-interest income of $3.5 billion for the quarter. However, it posted a loss of $335 million in non-interest income for the quarter due to derivative losses of $1.7 billion. Guarantee fee income increased by $149 million from 2017 to 2018, largely from a 17 percent growth of the multi-family guarantee portfolio. Expenses were $4.8 billion and $1.4 billion respectively.
Freddie Mac said it helped two million families rent or own a home in 2018 and provided $396 billion in liquidity to the mortgage market. Approximately 46 percent of purchase loans went to first time buyers. The total guarantee portfolio grew 5 percent to $2.1 trillion.
Risk, as measured by conservatorship capital, was reduced by $11 billion, or 16 percent from the previous year. Less capital was needed due to home price appreciation and the disposition of legacy assets and the transfer of credit risk.
The company said it expects to pay a $1.5 billion divided to the U.S. Treasury in March. This will bring its cumulative dividend payments to $116.5 billion.