Fannie Mae Reports $1.9B Profit in the First Quarter

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By Jacob Maslow

Fannie Mae (OTCBB:FNMA) posted a net income of $1.9 billion in the first quarter. The first quarter figure is lower than the same period last year as the company experienced bigger losses on investments and lower fee income. The company announced the results on Thursday for the January-March period.

The first quarter marked the 13th straight profitable quarter for the company. Fannie Mae also says that it will pay a $1.8 billion dividend to the U.S. Treasury in June. That leaves the company with $138.2 billion in dividends to be paid.

Fannie Mae and Freddie Mac were both saved by the government at the peak of the financial crisis in 2008. Together, the two companies either own or guarantee nearly half of all mortgages in the United States, which is worth roughly $5 trillion. Nearly 90% of new home loans are backed by Fannie Mae, Freddie Mac and other federal agencies.

Neither company actually extends loans directly to borrowers. Instead, they purchase mortgages from lenders and then package them as bonds. They then guarantee them against default and sell them off to investors. This allows new home loans to become available.

However, a drop in long-term interest rates has caused derivatives losses. These are investments that Fannie Mae uses to avoid rate swings.

Last year, a plan to phase out Freddie Mac and Fannie Mae advanced in the Senate. The White House endorsed the measure, which would create a new government insurance fund that would only serve as a loan guarantor as a last resort.

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