Freddie Mac and Fannie Mae both reported profitable results for the first quarter of 2014 today, the 10th consecutive profit for Freddie Mac and the 9th for its sister company. Based on their quarterly earnings the government sponsored enterprises (GSEs) will make aggregate dividend payments of $10.2 billion to the U.S. Treasury under terms of their respective senior preferred stock agreements.
Freddie Mac reported its net income in the first quarter at $4.0 billion compared to $8.6 billion in the fourth quarter of 2013 and comprehensive income for the two periods was $4.5 billion and $9.8 billion. Fannie Mae reported net income of $5.3 billion and comprehensive income of $5.7 billion for the first quarter of 2014 compared to fourth quarter results of 6.6 billion and $6.5 billion respectively. Freddie Mac's income was impacted by $4.9 billion and Fannie Mae's by $4.1 billion in revenue from legal settlements relating to private-label securities lawsuits. Freddie Mac also reported it suffered derivative losses of $2.4 billion driven by long-term interest rates.
Freddie Mac
Freddie Mac reported it had $3.5 billion in net interest income in the first quarter of 2014 compared to $3.8 billion in the fourth quarter of 2013. Non-interest income for the two periods was $5.8 billion versus $6.1 billion and non-interest expenses were $(0.8) billion and $(0.4) billion. The derivative losses of $2.4 billion in the first quarter were against gains of $1.0 billion in the previous period.
Freddie Mac will pay a dividend of $4.5 billion to the U.S. Treasury, bringing the total cash dividends paid since the GSEs were placed in conservatorship in 2008 to $86.3 billion. In the first years of conservatorship Freddie Mac drew an aggregate of $71.3 billion from the Treasury
During the first quarter of 2013 Freddie Mac provided funds to 104,000 borrowers to purchase a home and financed 51,000 multifamily rental units. Relief refinancing including loans under the Home Affordable Refinance Program (HARP) was provided to 59,000 borrowers and 81,000 were refinanced through other programs.
The companies assistance to distressed homeowners resulted in 19,000 loan modifications, 8,000 repayment plans, 2,000 forbearance agreements, and 5,000 short sales or deeds-in-lieu of foreclosure during the quarter. Since the beginning of the conservatorship Freddie Mac has assisted over 12.6 million homeowners avoid foreclosure.
Freddie Mac's 2005-2008 legacy single-family book continues to represent a declining portion of the company's single-family credit guarantee portfolio. At March 31, 2014, the 2005-2008 legacy single-family book represented 15 percent of the unpaid principal balance of the company's single-family credit guarantee portfolio, but accounted for 77 percent of the company's single-family credit losses during the first quarter of 2014. The gradual reduction of Freddie Mac's 2005-2008 legacy single-family book has positively impacted the payment performance of its overall single-family credit guarantee portfolio.
Fannie Mae
Fannie Mae's net income of $5.3 billion and comprehensive income of $5.7 billion for the first quarter of 2014 compares to net income of $58.7 billion and comprehensive income of $59.3 billion for the first quarter of 2013, which reflected Fannie Mae's release of a majority of the valuation allowance on its deferred tax assets. Fannie Mae's first quarter 2014 comprehensive income includes a provision for federal income taxes of $2.6 billion resulting from the company's estimated federal income tax expense for the first quarter 2014.
Fannie Mae will pay a dividend of $5.7 billion to the U.S. Treasury as a result of its first quarter earnings. This will bring the total dividends paid to $126.8 billion against cumulative draws under its senior preferred stock purchase agreement of $116.1 billion. Fannie Mae has not requested funds from Treasury since the first quarter of 2012.
Fannie Mae said it remained the largest single issuer of single-family mortgage-related securities in the secondary market in the first quarter of 2014, with an estimated market share of new single-family mortgage-related securities issuances of 41 percent in the first quarter of 2014, compared with 46 percent in the fourth quarter of 2013 and 48 percent in the first quarter of 2013.
As of March 31, 2014, 78 percent of Fannie Mae's single-family conventional guaranty book of business consisted of loans it had purchased or guaranteed since the beginning of 2009. Given their strong credit risk profile and based on their performance so far, the company expects that in the aggregate these loans will be profitable over their lifetime, meaning the company's guaranty fee income on these loans will exceed the company's credit losses and administrative costs for them.
Thus far in 2014 Fannie Mae has provided financing for 200,000 home purchases, 200,000 refinances, and 100,000 units of multifamily housing. Fannie Mae says it continues its efforts to keep borrowers in their homes and in the first quarter of 2014 it arranged 36,000 loan modifications, 2,255 repayment plans or forbearances, 1,374 short sales and 538 deeds in lieu of foreclosure.
