Fannie Mae Profits Down in Third Quarter

Fannie Mae, the mortgage firm controlled by the government, will pay $2.2 billion to the U.S. Treasury Department after posting $2 billion in net income for the third quarter. With the expected December dividend payment, the company will have paid a total of $144.8 billion in dividends to Treasury.

The decline was driven by $US2.59 billion in fair-value losses in the quarter, compared with a loss of $US207 million in the year-earlier period.

The company says its net income decreased because of a drop in long-term interest rates that altered the value of those derivatives that were being used as a hedge to risk.

Prior to the bailout, government-sponsored enterprises (GSE) Fannie and Freddie functioned as privately owned companies that were chartered by the government. In the previous quarter, Fannie realized $2.6 billion in gains from the derivatives, when the rates rose.

The companies remain caught between shareholders and civil-rights groups who want to see them freed from government control, a White House that believes the current system is broken, and a Congress that can’t come to agreement on what the future system should be. The amendment removes the proposed delay in cuts to Fannie Mae’s and Freddie Mac’s g-fees and also strikes down the proposed reduction to the Fed’s fixed dividend rate for banks, which would limit the banks’ ability to lend.

The USA government stepped in to aid a number of industries during the financial crisis including the auto industry, of which each of the companies that were helped by the federal government in that industry have since paid back all the monies loan to them to keep them afloat.

The company reported a loss of $500,000 for the quarter. Fannie said the shift reflects guaranty fee increases implemented in 2012 and shrinking of its retained mortgage portfolio.