Tuesday
September 16, 2014

REO Inventories Shrinking for Fannie, Freddie

|
-A A +A

REO Inventories Shrinking for Fannie, Freddie

Government-sponsored enterprises Fannie Mae and Freddie Mac have been working through the REO inventory load they hold on their books, a move that helped them report a profit yet again in the latest quarter.

In the second quarter of this year, Fannie Mae’s REO inventory stood at 96,796 compared to 166,787 properties it held in the third quarter of 2010. Freddie Mac is also reporting a large decrease: In the second quarter of this year, it held 36,134 REOs on its books compared to its peak of 74,897 in the third quarter of 2010.

REO numbers have been steadily dropping over the last few quarters as foreclosures continue to fall nationwide.

Fannie Mae says that in the first half of this year it has seen a “modest increase in REO prices” compared with the “significant increase” in REO prices it saw during the second quarter and first half of 2013.

As the housing market improves, the GSEs are continuing to report profits. In the second quarter, Fannie Mae reported a net income of $3.7 billion while Freddie Mac reported a net income of $1.4 billion, its 11th consecutive quarter of positive earnings. Tim Mayopoulos, Fannie Mae’s chief executive, told reporters on a recent conference call that he expects Fannie Mae to remain profitable for the “foreseeable future.”

Both Fannie Mae and Freddie Mac came under government conservatorship in 2008. The GSEs must turn over their profits to the U.S. Treasury, a requirement for the government bailout. Fannie Mae and Freddie Mac will make their latest payments to the U.S. Treasury in September, which will amount to $218.7 billion to taxpayers in return for the $187.5 billion in aid they had received during the height of the financial crisis, Reuters reports.

Source: “Fannie and Freddie Results in Q2: REO Inventory Declines, ‘Modest Increase in REO Prices,’” Calculated Risk blog (Aug. 8, 2014) and “U.S. Taxpayers to Get Another Big Check From Fannie Mae, Freddie Mac,” Reuters (Aug. 7, 2014)