The combined second quarter 2015 earnings of Fannie Mae and Freddie Mac increased $2.4 billion from the first quarter to a total of $8.8 billion, according to the Quarterly Performance Report of the Housing GSEs from the Federal Housing Finance Agency (FHFA).
FHFA says the major drivers of the increase were net interest income and gains on derivatives as increases in swap rates contributed to earnings. The report also added that "earnings during the quarter also benefited from rising house prices, combined with the continued decline in the number of delinquent loans guaranteed by the Enterprises."
The Enterprises also reported a combined $5.6 billion gain on derivatives in the second quarter, mostly due to an increase in medium- and longer-term swap rates.
The report also showed credit quality of new single-family business remained high during the first six months of 2015. The weighted average credit score was 750 for Fannie Mae and 751 for Freddie Mac, up from 744 reported for both Enterprises in 2014.
In addition, the average loan-to-value ratio for new business declined at both Fannie Mae and Freddie Mac as refinances outweighed purchase-mortgage originations.
Refinances made up 61 percent of single-family new business volume at Fannie Mae and 63 percent at Freddie Mac. Meanwhile, HARP volume was steady at 31,600 refinances for the first and second quarter of 2015.
The Enterprises and Ginnie Mae accounted for $258 billion or 67 percent of mortgage-backed security issuance volume in the second quarter, up from $207 billion recorded in the first quarter.
FHFA also issued a conservator's update on Fannie Mae and Freddie Mac, noting that by the end of 2007, the Enterprises had $71 billion of combined capital. However, the Enterprises have $254 billion in combined charges against capital from 2007 to the second quarter of 2015.
To put this into perspective, the Treasury must support $187.5 billion of these charges through the Senior Preferred Stock Purchase Agreements.
The Federal Home Loan Bank (FHLBank) System reported a total net income of $669 billion in the second quarter of 2015, down $355 million from $1.023 billion in the first quarter.
"Net income was primarily lower due to lower net interest income and higher operating expenses related to the [FHLBanks of Seattle and Des Moines] merger," the FHFA said.
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