Daily Management Review

Fannie Mae's profit dropped thanks to low rates in the US


08/04/2016


Mortgage agency Fannie Mae will transfer $ 2.9 billion in dividends to the US treasury in September 2016. Meanwhile, the agency’s revenue and profit in II quarter have declined, which was largely causesd by low interest rates.



Mark Warner
Mark Warner
Net profit of Fannie Mae in the II quarter was $ 2.95 billion compared with $ 4.64 billion for the same period last year. Yet, the numbers increased from $ 1.14 billion in comparison with I quarter of this year. Revenue of the US mortgage agency Fannie Mae fell 12% to $ 5.46 billion.

The profit decline is primarily obliged to the long-term fall of interest rates, which affected the value of derivative financial instruments, used by Fannie Mae to manage risks. Subsidiary company Freddie Mac also noted a decrease in profit in II quarter 2016.

Percentage of mortgage loans supported by the agency with overdue more than 90 days fell to 1.32% in the II quarter, compared to 1.44% in I quarter and 1.66% in the same quarter last year. Meanwhile, housing prices continue to grow, and the unemployment rate remained at a low level.

In II quarter, Fannie Mae booked $ 1.6 billion of reserves in case of losses on loans, whereas last year the reserve was $ 1.03 billion.

Earlier, Timothy J. Mayopoulos is Fannie Mae's President and Chief Executive Officer (CEO) said that the company’s funds may end by January 2018. Most likely, it will happen because of the fact that the government withdraws the agency's profits as payments for investments made during the crisis.

Fannie Mae and Freddie Mac control about 40% of the US mortgage market. During the financial crisis that began with the crisis in the housing market, both agencies found themselves on the verge of bankruptcy, and US authorities have been forced to put them under external control and to inject a total of $ 187.5 billion into their capital.

source: bloomberg.com






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