Fannie Mae's earnings enhance because of a change in accounting

Fannie Mae posted an increase in net income for the first quarter on Friday on completing a long-planned move to hedge accounting.

The accounting change contributed $ 1.2 billion to net income of $ 5 billion for the quarter, down from $ 4.6 billion in the fourth quarter of last year and $ 461 million in the first three months of the Year 2020.

Hedge accounting will in the future align Fannie's reporting to competitor Freddie Mac and fix a discrepancy between the recorded value of financial instruments used to offset interest rate volatility on mortgages and the loans themselves.

"Now we're offsetting these derivative hedges against the fair value gains or losses against the loans or funds that are backing them," said Fannie Mae CFO Celeste Mellet Brown during a media call on Friday about the state-sponsored company's earnings .

At $ 6.8 billion, revenue was up from the first quarter last year when the comparable figure was $ 5.5 billion. However, they were down 6% from $ 7.2 billion in the exceptionally strong fourth quarter.

Like Freddie, Fannie found that the number of new loans taken out to refinance old loans remained relatively high, even though interest rates rose relatively for the quarter.

The refi component of single-family mortgage acquisitions was constant at $ 301 billion for the first three months of this year compared to the previous quarter, up from $ 122 billion in the same period in 2020.

Overall, single-family home acquisitions totaled $ 400 billion in the first quarter, after an exceptionally strong $ 426 billion in the prior fiscal period and $ 191 billion in the first three months of 2020.

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