Econintersect: Fannie Mae (OTC:FNMA) will have made payments of earnings and dividends of $59.4 billion in the second quarter 2013. The total amount will accrue 
to the U.S. Treasury, resulting in a reduction of the national debt in that amount. The Treasury has to date advanced $116.1 billion to maintain liquidity for Fannie and the company has issued the Treasury senior preferred stock with a liquidation preference (amount owed the government if Fannie declares bankruptcy) of $117.1 billion. As of 30 June 2013 Fannie will have made total payments of $95 billion to the U.S. Treasury. Earnings and dividend payments do not reduce the Treasury preferred stock holdings.
Here is the summary from Fannie Mae’s first quarter report issued 09 May 2013:
- Strong credit results and increased revenue resulted in pre-tax income of $8.1 billion for the first quarter, the largest quarterly pre-tax income in the company’s history.
- Improvement in Fannie Mae’s financial results, the strong credit profile of the company’s new book of business, and other factors enabled the company to release $50.6 billion valuation allowance on deferred tax assets.
- Based on net worth of $62.4 billion at March 31, 2013, the company’s dividend obligation to Treasury will be $59.4 billion by June 30, 2013. After the June payment, we will have paid an aggregate of $95.0 billion in cash dividends to Treasury since conservatorship began. Senior preferred stock outstanding and held by Treasury remained $117.1 billion at March 31, 2013, as dividend payments do not offset prior Treasury draws.
- Fannie Mae has funded the mortgage market with approximately $3.5 trillion in liquidity since 2009, enabling families to buy, refinance, or rent a home.
The following graph shows the declining numbers of seriously delinquent mortgages (90 days late or more):
At the end of 2012 the delinquency numbers for all mortgages (including Fannie) were much worse than those for Fannie Mae alone. From Bloomberg (25 March 2013):
Home loans that were 90 days or more behind or in the foreclosure process fell to 6.78 percent of mortgages in the fourth quarter from 7.03 percent in the previous three months, the Mortgage Bankers Association said in a report today. The rate was 7.73 percent a year earlier.
Part of the reason for the lower delinquency rates for Fannie derive from the distribution of mortgages held. From the 09 May report:
From 2009 forward Fannie Mae has been issuing almost half of the mortgages in the U.S. From the 09 May report:
Most of the rest since 2007 have been issued by Freddie Mac and Ginnie Mae, as can be seen in the following from Freddie Mac’s June 2013 report:
Click on graphic for large image.
The large difference between private label and GSE (government sponsored enterprises) is therefore likely due in substantial portion to the higher level of pre-2008 mortgages in the private label category.
Sources:
- Fannie Mae Reports Pre-Tax Income of $8.1 Billion for First Quarter 2013 (Pete Bakel, Fannie Mae press release, 09 May 2013)
- Seriously Delinquent U.S. Mortgages Fall to Four-Year Low (John Gittelsohn, Bloomberg, 25 March 2013)
- Freddie Mac Update (Company report, June 2013)
