WASHINGTON Fannie Mae FNMA.OB, the largest source of U.S. housing funds, on Wednesday said it would not need more taxpayer aid after posting a first-quarter profit of $2.7 billion to wrap up its steadiest quarter since being taken over by the government.
For the first time since the third quarter of 2008, Fannie Mae did not require taxpayer aid to stay afloat, and it paid the U.S. Treasury $2.8 billion in dividends for the government's stake in the company.
The government took over Fannie Mae and its smaller rival Freddie Mac FMCC.OB in September 2008 at the height of the credit crisis as losses from soured mortgages threatened their solvency. The cost of the bailouts was more than $151 billion.
Fannie Mae's first-quarter profit compared with a net loss of $6.5 billion in the first quarter of 2011. The significant improvement was primarily due to lower credit-related expenses, as home prices stabilized in some pockets of the country and there was a decrease in losses on sales of foreclosed properties.
Susan McFarland, executive vice president and chief financial officer, told Reuters the first-quarter results indicated the company has the ability to return some of the taxpayer dollars it received.
"It's great to have a quarter like this one that begins to show the value of our new book of business and shows the earning potential that we have to pay the taxpayer back," she said in an interview.
But McFarland cautioned that Fannie Mae might not be out of the woods yet, as the economy remains soft and Fannie Mae has to remain "very attentive to what is going on" as it will affect credit-related expenses.
Fannie Mae has drawn a total of $117.1 billion in aid and has paid back $22.6 billion in the form of dividend payments to the Treasury for the government's nearly 80 percent stake in the company.
Fannie Mae's serious delinquency rate -- those single-family home loans at least three months past due or near foreclosure -- was 3.67 percent in the first quarter, down from 5.47 percent a year earlier, and has dropped every quarter over the last two years.
Since seriously delinquent loans have performed better, loan-loss provisions fell to $2 billion in the first quarter from $5.5 billion in the fourth quarter and $10.55 billion in the 2011 first quarter.
The company said the progress in its financial health in the first quarter was also due to a decline in its inventory of foreclosed properties. Those single-family real-estate owned, or REO, properties are being sold at a faster pace and at improved prices.
Fannie Mae's credit loss reserves decreased to $74.6 billion as of March 31, down from a peak of $76.9 billion at December 31. A majority of the company's losses are still due to loans purchased between 2005 and 2007.
"Today's results exemplify the tremendous progress we have made since 2009," Fannie Mae President and CEO Michael Williams said in a press release. "Our credit-related expenses have decreased substantially due in part to stabilizing home prices, lower delinquency rates, and selling foreclosed properties at market-competitive prices."
According to the S&P/Case-Shiller 20-city composite index, which tracks home values in 20 major U.S. metropolitan areas, U.S. home prices were down 3.5 percent in February from a year earlier and are now at their lowest level since late 2002. Over the past 12 months, 15 of the 20 major metropolitan areas monitored saw declines.
Fannie Mae and Freddie Mac do not lend to consumers but buy and insure mortgages from banks to help lenders make more loans.
Last week, Freddie Mac posted a profit of $577 million for the first quarter and drew an additional $19 million in taxpayer aid. The profit failed to make up for a dividend payment to the government for its controlling stake in the company.
(Editing by James Dalgleish, Maureen Bavdek and John Wallace)