Fannie Mae Beats Wal-Mart and GE With Record Profit in 2012

Fannie Mae (FNMA), the mortgage financier seized by U.S. regulators during the credit crisis, reported the largest annual profit in company history as a housing rebound helped wean the firm from federal aid.

The government-sponsored enterprise had net income of $17.2 billion for 2012, outpacing profits at S&P 500 companies such as Wal-Mart Stores Inc. (WMT), General Electric Co. and Berkshire Hathaway Inc. (BRK/A), according to data compiled by Bloomberg.

Fannie Mae’s net income for 2012 compared with a loss of $16.9 billion in 2011, the company said today in a statement. Profits totaled $7.6 billion for the three months ended Dec. 31 after accounting for a $4.2 billion dividend payment to the Treasury Department for the government’s stake.

“We expect to remain profitable for the foreseeable future,” Fannie Mae President and Chief Executive Officer Timothy J. Mayopoulos said on a conference call with reporters. “It’s a very good thing for taxpayers, but there’s still an important task in front of policy makers to determine what structure they want to have for the future housing finance system, what institutions they want to have playing the various roles in that system and then figuring out how to attract private capital.”

Photographer: Chip Somodevilla/Getty Images

Fannie Mae's headquarters in Washington, DC. Close

Fannie Mae's headquarters in Washington, DC.

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Photographer: Chip Somodevilla/Getty Images

Fannie Mae's headquarters in Washington, DC.

Government’s Investment

Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac (FMCC) buy mortgages from lenders and package them into securities on which they guarantee payments of principal and interest. Since they were taken into conservatorship in 2008, the two companies have drawn $187.5 billion from Treasury and have sent back $65.2 billion in dividends, which count as a return on the government’s investment and not as a repayment.

Freddie Mac reported in February that it earned $11 billion in 2012, compared with a loss of $5.3 billion in 2011.

At the Market Now Blog: Fannie and Freddie, the $5 Trillion Gorillas the U.S. Can't Kill

Regulators who took the GSEs into conservatorship in 2008 didn’t create an avenue for them to regain independence because lawmakers were expected to wind them down and replace them before they returned to profitability.

Under the terms of an agreement with Treasury that went into effect this year, the enterprises will be allowed to retain only $3 billion in net worth. Any profits beyond that amount will go to taxpayers.

Taxpayers may soon get a windfall from Fannie Mae: The company could be required to report as much as $58.9 billion in deferred tax credits as assets as soon as the first quarter of this year, according to the statement. The company would have to pay that amount to Treasury to stay under the net worth cap.

The credits weren’t reported as assets when Fannie Mae didn’t expect it would ever earn taxable income.

The company has “sufficient liquidity” on its balance sheet to raise capital for the payment without taking additional aid from Treasury, Mayopoulos said.

Fannie Mae on March 14 requested extra time to file its earnings statement for 2012 as accountants examined whether the deferred tax assets would have to be reported as income as soon as the final quarter of 2012. In the end, the company determined it didn’t have to treat the credits as assets yet.

To contact the reporter on this story: Clea Benson in Washington at cbenson20@bloomberg.net

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net

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