The bailed-out housing giant said net income jumped to $8.7 billion from $1.8 billion a year earlier on the back of stable revenues and continuing improvement in credit quality that prompted further releases of loan loss reserves. The quarter also benefited from a compensatory fee agreement from Bank of America (BAC).
Fannie said it expects "to remain profitable in the foreseeable future" though earnings may vary significantly quarter to quarter due to various factors such as changes in interest rates or home prices.
Fannie Mae finished the quarter with a net worth of $11.6 billion. Under the terms of its amended bailout agreement with the U.S. Treasury, the company is required every quarter to make a dividend payment to the government of all of its earnings, less a minimal capital cushion of $3 billion. The payouts do not constitute a repayment of the government bailout money. The Treasury continues to hold $117.1 billion in senior preferred Fannie Mae shares.As of Sept.30,2013, the company has paid the government $105.3 billion in dividends. After the December payment, it will have paid $114 billion in dividends to the Treasury. Shares of Fannie Mae were up 4.3% in pre-market trading, to $2.40.. Fannie Mae and Freddie Mac (FMCC) were taken into government conservatorship at the height of the credit crisis in September 2008. In the wake of the crisis, as the private market for mortgage securitizations faded, the agencies stepped in to fill the void. As a result, Fannie and Freddie, along with the Federal Housing Administration, guarantee more than 80% of freshly originated mortgages. The quality of the loans originated since 2009, which now account for 75% of the company's single-family mortgage book, is considered pristine and Fannie Mae says it expects the loans to be profitable over their lifetime. Still, most policymakers are keen on winding down the agencies and are calling for a greater role of private capital in the market. However, there is disagreement on whether the government should continue to maintain some presence in the market in the form of a limited guarantee. Some investors and market participants are calling for the agencies to be rehabilitated and returned to their private forms, though political analysts say there is little appetite in Washington to keep Fannie and Freddie alive. -- Written by Shanthi Bharatwaj in New York.