Top Nav

Fannie Mae Shares Soar on Record Earnings

Chris Preston

Still not convinced that we’re in the midst of a housing recovery? Consider yesterday’s record Fannie Mae (OTC: FNMA) earnings as fairly conclusive evidence.

The largest mortgage financier in the U.S. earned $7.6 billion in its fiscal fourth quarter. For the year, Fannie Mae – a.k.a. the Federal National Mortgage Association – made a profit of $17.2 billion, a complete turnaround from a $16.9 billion loss in 2011. In fact, it was the organization’s first profitable quarter since the government rescued it from the brink of collapse in 2008.

The sparkling earnings report pushed Fannie Mae shares up 25% at one point yesterday. They’re up 48% since last Wednesday.

Several factors contributed to Fannie Mae’s record quarter. Home prices rose 8.1% from a year earlier. Mortgage delinquencies dropped to their lowest level since 2008. Foreclosures are down. More new homes are being built.

What could have made Fannie Mae’s fourth-quarter earnings even more impressive is a $59 billion Deferred Tax Asset the company plans to cash in. It will likely do so in the current quarter – something that could make Q1 even more profitable, and should bode well for the penny stock going forward.

In the meantime, Fannie Mae’s brother company, Freddie Mac (OTC: FMCC), is benefitting from Fannie Mae’s big quarter. Shares of the Federal Home Loan Mortgage Corporation are up 40% since last Wednesday.

Freddie Mac last reported earnings on March 1, posting a net income of $4.5 billion – a 55% increase from the previous year.

Income and Prosperity Offer

Income & Prosperity is designed to help you seek out the safest income opportunities and discover an entire world of dividend investments. This free newsletter has a laser-like focus on one issue and one issue only: how can investors near or in retirement generate more income. Each day, you'll receive our best investment idea - skewed towards safe income - but also including lesser known opportunities to grow your wealth while keeping it out of harm's way.
You've successfully subscribed, click the link in your email to confirm your subscription.
There was an error, and you have not been subscribed, please try again.