After a strong run-up in earnings spanning more than a year, the Federal Home Loan Banks posted a modest decline in quarterly income in the third quarter. (Includes three data tables.)
Fannie Mae and Freddie Mac revenues ticked up in the third quarter, but an increase in net expenses cut into profits. Those expenses included damages and interest awarded to shareholders in Fairholme v. FHFA. (Includes data table.)
Timing differences in their provisions for loan losses allowed Fannie’s first-quarter profits to more than double while Freddie’s climbed just 13.2% compared with the fourth quarter. (Includes data chart.)
In order to have a return on capital sufficient to attract private investors, the GSEs would have to charge g-fees of about 76 basis points, according to former Freddie CEO Don Layton.
Almost all of the decline in combined GSE profits was due to a spike in loan-loss provisions. But while Fannie’s provisions continued to grow in the fourth quarter, Freddie’s may have peaked in the third quarter. (Includes data chart.)