Home prices help Fannie Mae profit, no U.S. help needed

WASHINGTON Wed Aug 8, 2012 2:29pm EDT

WASHINGTON (Reuters) - Fannie Mae (FNMA.OB) on Wednesday reported a quarterly profit due to stronger home prices and said the mortgage financier did not need additional taxpayer funds to stay solvent, the second consecutive quarter the company did not request help since it was seized by federal authorities during the financial crisis.

Fannie Mae, which buys mortgages from lenders and repackages them as securities for investors, said it earned $5.1 billion for the second quarter ending in June, enough to keep the company afloat and make a required $2.9 billion dividend repayment to the U.S. Treasury.

"We think that there is a reasonable chance that we can make a profit for the rest of the year," Fannie Mae's chief financial officer Susan McFarland said in an interview.

The higher home prices and a decline in the company's single-family delinquency rate underpinned Fannie Mae's $7.8 billion profit for the first half of the year. In the same period a year earlier, the government-controlled company lost $9.3 billion.

McFarland called the second-quarter housing prices "normal seasonal improvement" and said she did not expect to see this kind of trend continuing. "There is a high likelihood that we will see home prices come down in the latter half of the year," she said. Because of that, the company does not expect its financial results to be as strong in the latter half of the year compared to the first half.

The latest data showed U.S. home prices rose for the fourth month in a row in May, suggesting the recovery in the housing market is gaining traction after the 2007-09 collapse.

REPAYMENTS

Fannie Mae has drawn down $116.1 billion in taxpayer money and has repaid the U.S. Treasury $25.6 billion, or 22 percent of the company's government funds. The mortgage finance giant's smaller sister company Freddie Mac (FMCC.OB) has drawn $72.3 billion in taxpayer funds since it was taken over and has made about $20.1 billion in repayments.

Although Fannie Mae did not need taxpayer funds this quarter to help cover required 10 percent dividend repayments, McFarland said she expects there may be periods where the company's income would not be sufficient enough to meet the requirements.

"A lot of things are out of our control with the economy being soft," she said. "We have to be a bit cautious before we declare permanent victory and that we will be able to sustain profits quarter in and quarter out."

On Tuesday, Freddie Mac said it earned $3 billion for the three months ending June 30, due to a decline in credit losses. The company also said it did not need additional funds from the U.S. Treasury.

(Reporting By Rachelle Younglai; Editing by Theodore d'Afflisio, Gary Hill)

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