Fannie Mae, the government-backed mortgage financier, said on Wednesday that it made a profit in the first quarter and that it did not need additional bailout money — a first since the federal government took it over in fall 2008.
A slowdown in the decline of home prices and in the number of homes entering serious delinquency allowed the company to eke out a profit after paying its dividend to the Treasury. Fannie Mae also said losses on its portfolio of home mortgages had probably peaked and that it expected better profits in the future, another sign that the worst might be over for the battered American housing market.
The company reported quarterly net income of $2.7 billion, up from a $6.5 billion loss in the first quarter of 2011.
Fannie has received about $116 billion from the Treasury over the last three and a half years and paid back about $23 billion in dividends. Its brother institution, Freddie Mac, has received about $72 billion and paid back about $18 billion.
“We expect our financial results for 2012 to be significantly better than 2011,” Susan R. McFarland, Fannie Mae’s chief financial officer, said in a statement. “As our serious delinquency rate declines and home prices stabilize, we expect to reduce our reserves, which combined with revenue from our high-quality new book of business will drive our future results.”
Across the country, there are signs the housing market is stabilizing. Home prices have continued to fall but at a much slower pace. More Americans are buying houses than they were a year ago. Housing starts have risen more than 10 percent in the last year.
Fannie and Freddie, which own or guarantee millions of home loans, lose money when borrowers default — their financial fortunes are directly tied to the overall health of the housing market. Estimates for the two companies’ ultimate cost to the taxpayer vary widely. They depend on many variables, including default rates and home values. The Congressional Budget Office has estimated that they will cost taxpayers $53 billion between 2011 and 2020.
Recently, the Obama administration and some Democrats have urged Fannie and Freddie to take on more losses to further aid the housing market. The White House has pushed for Fannie and Freddie to allow mortgage servicers to reduce the amounts homeowners owe on their mortgages to reduce their chances of defaulting.
The Federal Housing Finance Agency, Fannie and Freddie’s overseer, estimated that a principal reduction program for homeowners who owed more than their homes were worth would cost the mortgage financiers $100 billion. Edward J. DeMarco, the acting head of the finance agency, has long resisted such a program on the ground that it would be too costly for taxpayers.
But recently, the agency has shown some signs of softening its resistance. An assessment released last month by Mr. DeMarco showed that writing down the mortgage principal for 691,000 homeowners who owed more than their homes were worth would actually cut Fannie and Freddie’s losses by $1.7 billion. Over all, the program would cost the taxpayer modestly, as the Treasury would pay incentives to encourage participation in the program.
Last week, Freddie Mac reported quarterly net income of $577 million for the first quarter. In the year-earlier quarter, it reported net income of $676 million. Freddie requested $19 million from the Treasury after making its $1.8 billion dividend payment to taxpayers. Fannie Mae paid out $2.8 billion in dividends to the government in the first quarter.
This is the first quarter that Fannie Mae has not made a request for additional bailout money from the Treasury. Those quarterly requests have ranged from $1.5 billion to as high as $19 billion since the government took over the mortgage financier. In the final quarter of 2011, Fannie drew down $4.6 billion; in the first quarter of 2011, it requested $8.5 billion.