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
	Acquisitions	Dispositions	Inventory
Q3/09	40,959	31,299	72,275
Q4/09	47,189	33,309	86,155
Q1/10	61,929	38,095	109,989
Q2/10	68,838	49,517	129,310
Q3/10	85,349	47,872	166,787
Q4/10	45,962	50,260	162,489
Q1/11	53,549	62,814	153,224
Q2/11	53,697	71,202	135,719
Q3/11	45,194	58,297	122,616
Q4/11	47,256	51,344	118,528
Q1/12	47,700	52,071	114,157
Q2/12	43,783	48,674	109,266
Q3/12	41,884	43,925	107,225
Q4/12	41,112	42,671	105,666
Q1/13	38,717	42,934	101,449
Q2/13	36,106	40,635	96,920
Q3/13	37,353	33,332	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.

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
	Acquisitions	Dispositions	Inventory
Q3/09	24,373	17,939	41,133
Q4/09	24,749	20,835	45,047
Q1/10	29,412	20,628	53,831
Q2/10	34,662	26,315	62,178
Q3/10	39,053	26,334	74,897
Q4/10	23,771	26,589	72,079
Q1/11	24,707	31,627	65,159
Q2/11	24,788	29,348	60,599
Q3/11	24,378	25,381	59,596
Q4/11	24,758	23,819	60,535
Q1/12	23,805	25,033	59,307
Q2/12	20,033	26,069	53,271
Q3/12	20,302	22,660	50,913
Q4/12	18,672	20,514	49,071
Q1/13	17,881	18,984	47,968
Q2/13	16,418	19,763	44,623
Q3/13	19,441	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.