Earnings Results: Fannie Mae profit increases as derivative losses shrink



Fannie Mae’s headquarters in Washington D.C.

Mortgage provider Fannie Mae reported a rising profit for the third quarter as losses on the company’s interest-rate derivatives decreased.

Fannie’s profit was $3.2 billion for the quarter, compared to $2 billion during the same period a year ago.

As interest rates moved more in the company’s favor, Fannie

FNMA, -0.59%

 recognized $491 million in fair value losses. Those losses cost $2.6 billion in the year-ago period.

That offset a revenue decline to $5.61 billion from $5.85 billion.

Fannie and its counterpart Freddie Mac

FMCC, -1.25%

  have operated under federal conservatorship since the 2008 financial crisis. Under a 2012 amendment to that arrangement, the enterprises must remit dividends above a certain threshold to the Treasury. In December, Fannie will send $3 billion, bringing its total to $154.4 billion, more than the $116.1 billion it received.

The profit sweeps have been disputed in court by equity shareholders. And Fannie’s CEO and its regulator have said that shrinking the capital buffers the enterprises are allowed to hold leaves them vulnerable to quarterly swings in earnings and may force them to tap Treasury for assistance again.

Fannie helped 338,000 Americans purchase a home, and 375,000 to refinance a mortgage, during the third quarter. The company does not make loans directly to consumers, but buys them from lenders. It also helped modify 21,000 loans during the quarter to help homeowners avoid foreclosure.

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