Once-bankrupt Fannie Mae reports record $17.2 bn profit for 2012

Bailed-out housing finance company, Fannie Mae yesterday reported a record $17.2 billion profit for 2012, driven by the housing-market recovery as also a huge settlement with Bank of America as regards mortgages during the subprime boom.

The housing finance giant, now owned by taxpayers after its 2008 rescue along with sibling firm Freddie Mac, posted a $16.9 billion loss in 2011.

Fannie Mae chief executive, Timothy J Mayopoulos said the company's financial results improved significantly in 2012 and it was expected that its earnings would remain strong over the next few years.

With its return to profitability the company has stopped taking bailout money from the federal government for the first time following its rescue. It had received around $116 billion in taxpayer money through mid-December.

Freddie Mac had received about $71 billion in the same time period and in February it also reported a return to profitability in 2012, with $11 billion in net income as against a loss of $5.3 billion the previous year.

Both companies have been able to start paying down the amount they owed taxpayers, with Freddie Mac paying $7.2 billion in dividends to the Treasury in 2012, and cutting the overall cost of its bailout to $47.5 billion.

Meanwhile, Treasury bonds were down yesterday with 10-year note yields remaining range bound though, as European and US stocks rallied.

Yields on the benchmark 10-year Treasury note (10_YEAR) were up 2 basis points to 1.86 per cent in late morning trade. Yields have hovered around 1.85 per cent since 27 March, though the US market remained closed on Good Friday, according to data compiled by FactSet.

Yields on the 30-year US bond (30_YEAR) were up 2 basis points to 3.1 per cent and yields on the five-year note (5_YEAR) rose 2 basis points to 0.768 per cent.

David Ader, head of government bond strategy at CRT Capital Group, wrote in a research note yesterday that it was difficult to extract a directional bias based on this ongoing sideways grind.

US stocks picked up yesterday, with gains in all major indexes, on a surge in health insurers due to new Medicare reimbursement rates. European stocks mostly gained despite data from the final March purchasing managers' index that showed euro-zone factory activity was down to a three-month low of 46.8.

In the mortgage world, Fannie Mae (FNMA) swung to a profit of $17.2 billion in 2012 as against a 2011 loss of $16.9 billion.

According to analysts, positive Fannie earnings might be somewhat supportive of weaker Treasurys.