Thursday, May 05, 2016 11:43:13 AM
Source: Dow Jones News
Fannie Mae said it would send a $919 million dividend payment to the U.S. Treasury Department in June, while reporting its profit that fell in latest quarter amid low interest rates.
The mortgage-finance company reported a profit of $1.14 billion for the first quarter, down from $1.89 billion a year ago and $2.47 billion in the fourth quarter.
Fannie Mae said the decrease was driven by lower long-term interest rates, which hurt the value of the derivatives it uses to manage risk. The decline was partially offset by increases in credit-related income.
Fannie Mae booked $2.81 billion in fair-value losses in the quarter, compared with losses of $1.92 billion in the prior-year period.
Fannie Mae's revenue slipped 7.5% to $4.97 billion.
On Tuesday, rival Freddie Mac reported a loss for the first quarter and said it wouldn't pay a dividend for the quarter. Freddie cited lower interest rates and a widening credit spread for the results.
Fannie and Freddie don't make mortgages. The companies buy loans from lenders, wrap them into securities and provide guarantees to make investors whole if the loans default.
The price of their portfolios rise and fall as interest rates change. They use derivatives in an effort to counteract that effect, but because of accounting rules, the derivatives can make large profits or losses appear over short periods.
The results come amid uncertainty over Fannie and Freddie's futures. The government took control of Fannie and Freddie through a conservatorship during the financial crisis in 2008, eventually injecting $71.3 billion into Freddie and $116.1 billion into Fannie. The companies now pay nearly all of their profits to the U.S. Treasury and are required to wind down their capital buffers over time until they reach zero by 2018.
When the deal was put in place, Congress was considering housing-finance legislation that would replace Fannie and Freddie with a new system. However, a bipartisan effort to replace the companies died in 2014, and legislators in an election year have shown little willingness to consider that or another bill.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
May 05, 2016 08:25 ET (12:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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