Tuesday, April 2, 2013

Fannie record profits

"Mortgage financing giant Fannie Mae Tuesday reported a record profit of $17.2 billion for 2012, a testament to how much the housing market has improved lately.

Just four years ago, the government had to step in and take control of Fannie Mae, which was brought down to its knees by deep losses from foreclosures and plunging home prices after the real estate bubble had burst.
It was the first full year profit reported by the company since 2006, and marked a significant turnaround from the $16.9 billion loss it posted for 2011.

It also means that Fannie Mae is poised to pay tens of billions of dollars in additional dividends to the U.S. Treasury, perhaps as soon as this quarter, in what could turn out to be its largest repayment to date. The government has pumped in $116 billion in bailout funds in its rescue of the company.

Fannie's improvement in results stems directly from a sharp drop in losses on its loan portfolio. That's because of the decline in foreclosures and delinquencies on the mortgages it owns or guarantees.
The company said it expects its "earnings to remain strong over the next few years."

Renter nation

"This year’s report starts off with a hard-hitting review and forecast of the volatility of the housing market by three chief economists and leads right into how the current “fiscal cliff” could very well point to us becoming a “renter nation”. The Mortgage Interest Deduction debate moves to the pages of the 2013 Trends Report with a review of this politically sensitive issue and why its possibly inevitable loss may severely cripple an already depressed housing market. “To be frank, mortgage debt isn’t as popular as it used to be”, says Donald B. Marron Director, Urban-Brookings Tax Policy Center.

Two large transactions also draw a lot of attention and scrutiny. First was Warren Buffet’s successful acquisition of the combined networks of more than 53,000 Prudential Real Estate and Real Living agents generating in excess of $72 billion in sales volume in 2011. And secondly the successful IPO of the world’s largest residential real estate brokerage group Realogy obtaining a $3.5 billion dollar market cap on day one. It is estimated that these two groups collectively between them control over 50% of the home sales in the United States. Add in Keller Williams Realty and RE/MAX Swanepoel says and you can see how this industry once dominate by ten of thousands of “Mom and Pop” business have in two decades consolidated down the “Fab Four” holding companies with control of over two thirds of all home sales in the United States."