GSEs Relying More on G-Fee Revenue as Investment Portfolios Shrink
By Brian Collins
Fannie Mae and Freddie Mac are relying more and more on their income from loan guarantee fees just at a time when their regulator is considering a proposal to reduce those fees. Fannie’s mortgage investment portfolio is shrinking and an increasing share of its revenue came from guarantee fees rather than interest earned on its investments, the secondary market agency’s second-quarter 2014 earnings report showed. Fannie reported Thursday that it had net income of $3.7 billion for 2Q14, while g-fee income for the second quarter totaled $2.9 billion. That compares to net income of $10.1 billion during the same period one year ago and net income of $5.3 billion in 1Q14. The first-quarter’s earnings were boosted by settlements involving securities firms that sold Fannie private-label MBS turned out to have high default rates. Going forward, Fannie and Freddie’s earnings are going to be determined by loan volume and guarantee fees, according to Federal Financial Analytics managing director Karen Petrou. The GSE expert also agreed with the outlook Fannie chief executive Timothy Mayopoulos presented Thursday in discussing the company’s earnings.