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Fannie Has Its Tin Cup Out Again

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Elliott

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"Fannie Mae reported a net loss of $6.5 billion for the fourth quarter, the result of a one-time accounting charge triggered by the reduction in corporate tax rates.

Fannie said Wednesday its regulator, the Federal Housing Finance Agency, would seek a fresh taxpayer infusion of $3.7 billion from the Treasury Department as a result of the loss, since the company is operating with limited capital under the terms of its federal bailout.

Though the company has telegraphed for months that it may require a new cash infusion, it is a politically fraught issue and the latest illustration of the government’s indefinite stewardship of Fannie and its smaller counterpart, Freddie Mac ."

I doubt we will be seeing a divided from Fannie for a few more decades. They currently are required to send any and all profits to the US Treasury.
 

timd354

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"Fannie Mae reported a net loss of $6.5 billion for the fourth quarter, the result of a one-time accounting charge triggered by the reduction in corporate tax rates.

Fannie said Wednesday its regulator, the Federal Housing Finance Agency, would seek a fresh taxpayer infusion of $3.7 billion from the Treasury Department as a result of the loss, since the company is operating with limited capital under the terms of its federal bailout.

Though the company has telegraphed for months that it may require a new cash infusion, it is a politically fraught issue and the latest illustration of the government’s indefinite stewardship of Fannie and its smaller counterpart, Freddie Mac ."

I doubt we will be seeing a divided from Fannie for a few more decades. They currently are required to send any and all profits to the US Treasury.
Well, considering that the Federal government scraped away all of their profits and not let them keep any meaningful capital reserves (Fannie has paid over $137 Billion to the treasury since 2010), why would this be a surprise. BTW, the feds have made over $100 Billion in profits from the GSE bailout and considering that the latest loss was a one time write down due to the recent tax law changes while Fannie's operating revenues still exceed its operating expenses, the dividends that Fannie is paying into the federal treasury will be continuing forward. The financials are available online and show that Fannie Mae had an operating profit of $7.58 Billion for the quarter on which it will pay $2.545B in federal income and also will send the federal treasury (as the senior preferred stockholder) dividends of $5.471B, meaning that even with a cash infusion of $3.7B from the the treasury, department, the government is receiving over $4 billion more from Fannie just in the 4th quarter of 2017 than they will be paying out to Fannie in the new $3.7 billion infusion.

Additionally, for the year of 2017, Fannie will pay the federal government approx. $16 Billion in federal income taxes and approx. $9 Billion in dividends (approx $25 Billion altogether) so the feds are still using Fannie as a cash cow, not the other way around

Those are the facts, but a lot of people don't bother to look at or analyze the facts.
 
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djd09

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Federal Reserve officials over the past few months have indicated they may be willing to reduce the $1.75 trillion worth of mortgage-backed securities it acquired as part of its experiment in quantitative easing amid the financial crisis.

The Fed is now the biggest buyer of U.S. government-backed mortgage debt, owning a third of the market, Bloomberg reported. But that’s long been a contentious issue, with some lawmakers arguing the investments go beyond what the central bank needs to achieve its mandate.

The Fed bought $387 billion worth of mortgage bonds last year alone in order to maintain its holdings.

https://therealdeal.com/2017/02/06/fed-could-look-to-sell-off-mbs-holdings/

Wonder why they do not talk about Toxic Assets anymore?
 

djd09

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"Billionaires have admitted that they are the beneficiaries of QE. For example, billionaire hedge fund manager Stanley Druckenmiller said the following about QE:

This is fantastic for every rich person,” he said Thursday, a day after the Fed’s stunning decision to delay tightening its monetary policy. “This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.

http://www.washingtonsblog.com/2013/11/qe-wall-street-bailout.html
 

Elliott

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Oregon
"From 2005 through 2007, the GSEs purchased over $1 trillion in subprime and Alt-A loans, driving up the housing bubble and driving down mortgage quality. During these years, HUD's regulations required that 55% of all GSE purchases be affordable, including 25% made to low- and very low-income borrowers. Housing bubbles are nothing new. We and other countries have had them before. The reason that the most recent bubble created a worldwide financial crisis is that it was inflated with low-quality loans required by government mandate. The fact that the same government must now come to the rescue is no reason for gratitude."

https://www.forbes.com/2009/02/13/h...peter_wallison_edward_pinto.html#27dc5d85778b
 

Pam Wyant

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Interesting. Can someone explain to me why Fannie Mae takes a loss due to corporate tax reductions? That doesn't make sense to me, but obviously there is something that I'm not connecting.
 

timd354

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Professional Status
Certified Residential Appraiser
State
Maryland
Interesting. Can someone explain to me why Fannie Mae takes a loss due to corporate tax reductions? That doesn't make sense to me, but obviously there is something that I'm not connecting.
They took a depreciation loss on tax credits that they had on their books (which could be applied to future years' federal income taxes) since the lower federal corporate income tax rates means that they will pay less federal income taxes in future years, which in turn causes a depreciation in the present value of these assets. The write down of these assets was a one-time provision of $9.9 Billion, however this is a paper loss due to depreciation not an operating loss. In fact Fannie had a pre-tax operating income of $18.4 Billion for 2017 and a net income of $2.5 billion for 2017 even after paying federal income taxes and absorbing this $9.9 billion write down. However, Fannie will need to take a draw to get its net worth back up required levels because the federal government has swept all of the GSE very large profits since 2012 and would not allow either Fannie or Freddie to retain a sufficient capital reserves cushion.

Whatever you think about the GSE's and whether or not you think they should be eliminated, replaced, privatized, whatever, the federal government has set up a situation where the GSE's are certain to fail even if they are making tens of billions of dollars in profits annually as all of the profits and virtually all capital reserves have been swept into the treasury department.

This situation is not something that can go on forever and ten years after the 2008 mortgage crisis, the federal government (specifically the Congress) has had more than enough time to find a permanent solution to this situation. Unfortunately, like many other things, Congress has completely abdicated its responsibility to enact a solution, whether that solution is to either permanently reform the GSE's or to eliminate the GSE's and put a new mortgage finance system in place.
 
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Elliott

Elite Member
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Apr 23, 2002
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Certified General Appraiser
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Oregon
Pretend your a corporation with zero capital. You'd be more interested in your profit and loss statement than your asset/liability statement. Playing games with income is the only way you'll goose your stock price. I imagine the Republicans could cobble up a plan for the GSE's, but they'd just have it knocked down by the Senate Democrats, which is where the current state of legislative progress is stalled (same as Medical Insurance reform or Immigration reform).
 
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