Lawler on Fannie and Freddie Results, REO Inventory Increases in Q3

From economist Tom Lawler:



Fannie Q3 Highlights: GAAP Net Income $8.7 Billion; Dividend Payment to Treasury in December $8.6 Billion, Bringing Cumulative Payments to $113.9 Billion; SF REO Inventory Up on Slower Dispositions Due to “Overall Market Conditions”



Fannie Mae reported that its GAAP net income in the quarter ended September 30, 2013 was $8.7 billion, and that its “GAAP” net worth at the end of September was $11.6 billion, which under the term of the “revised” senior preferred dividend agreement means that Fannie will make a $8.6 billion dividend payment to the Treasury in December. That payment will make cumulative dividend payments to the Treasury of bout $113.9 billion. The Treasury’s senior preferred stock amount will remain at $117.1 billion. Fannie’s cumulative cash Treasury draws totaled $116.1 billion.



On the SF REO front, here are some summary stats on Fannie’s activity.


Fannie SF REO Activity
 AcquisitionsDispositionsInventory
Q3/0940,959 31,299 72,275
Q4/0947,189 33,309 86,155
Q1/1061,92938,095 109,989
Q2/1068,83849,517 129,310
Q3/1085,34947,872 166,787
Q4/1045,96250,260 162,489
Q1/1153,54962,814 153,224
Q2/1153,69771,202 135,719
Q3/1145,19458,297 122,616
Q4/1147,25651,344 118,528
Q1/1247,70052,071 114,157
Q2/1243,78348,674 109,266
Q3/1241,88443,925 107,225
Q4/1241,11242,671 105,666
Q1/1338,71742,934 101,449
Q2/1336,10640,635 96,920
Q3/1337,35333,332 100,941





Fannie’s SF REO inventory increased from the end of June to the end of September, mainly as a result of a “surprisingly” large slowdown in REO dispositions. Fannie attributed the sharp drop in the sale of REO properties to “overall market conditions.”



Fannie Mae also reported that its internal “national” home price index, which is a repeat-sales index that (1) includes both Fannie-Freddie acquisitions and available public deed data; (2) excludes foreclosure transactions; and (3) in housing-unit weighted, was up by 9.4% over the 12 months ending in September.



Fannie and Freddie REO Click on graph for larger image.



CR Note: Here is a graph of Fannie and Freddie REO. This was the first quarterly increase since 2010.



From Lawler: Freddie Q3 Highlights: GAAP Net Income $30.5 Billion, $23.9 Billion of Which Reflects Release of Valuation Allowance Against Net Deferred Tax Asset; Dividend Payment To Treasury in December $30.4 Billion



Freddie Mac reported that its GAAP net income in the quarter ended September 30, 2013 was $30.5 billion, $23.9 billion of which was related to a release of the company’s valuation allowing against its net deferred tax asset. This release, in turn, reflected the company’s massively improved earnings outlook. Freddie’s GAAP net worth at the end of September was $33.4 billion, which under the term of the “revised” senior preferred dividend agreement means that Freddie will make a $30.4 billion dividend payment to the Treasury in December. That payment will make cumulative dividend payments to the Treasury of about $71.345 billion, versus cumulative previous cash draws from Treasury of $71.336 billion. The Treasury’s senior preferred stock amount will remain at $72.3 billion.



On the SF REO front, here are some summary stats on Freddie’s activity.


Freddie SF REO Activity
 AcquisitionsDispositionsInventory
Q3/0924,373 17,939 41,133
Q4/0924,749 20,835 45,047
Q1/1029,412 20,628 53,831
Q2/1034,662 26,315 62,178
Q3/1039,053 26,334 74,897
Q4/1023,771 26,589 72,079
Q1/1124,707 31,627 65,159
Q2/1124,788 29,348 60,599
Q3/1124,378 25,381 59,596
Q4/1124,758 23,819 60,535
Q1/1223,805 25,033 59,307
Q2/1220,033 26,069 53,271
Q3/1220,302 22,660 50,913
Q4/1218,672 20,514 49,071
Q1/1317,881 18,984 47,968
Q2/1316,418 19,763 44,623
Q3/1319,441 16,945 47,119





Freddie’s SF REO inventory increased last quarter, “as foreclosure activity increased in judicial foreclosure states and disposition activity moderated.”



Freddie also showed that its “national” home-price index, a repeat-transactions index that (1) uses only Fannie/Freddie transactions; (2) uses repeat purchase transactions and some refinance transactions; and (3) is value weighted with state weights based on the share of Freddie’s SF mortgage portfolio, increased by 10.8% over the 12 months ending in September.

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