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Fannie Mae Slips To Loss In FY17; To Not Pay Dividend For Q1 To Treasury

Fannie Mae (FNMA) reported that its net loss attributable to common stockholders for fiscal year 2017 was $6.48 billion or $1.12 per share, compared to net income of $77 million or $0.01 per share in the prior year.

Fannie Mae's 2017 after-tax net income of $2.46 billion fell from $12.31 billion in the previous year. The latest period's results include a $9.9 billion provision for federal income taxes in the fourth quarter resulting from the remeasurement of the company's deferred tax assets due to the Tax Cuts and Jobs Act.

As a result, Fannie Mae reported a net worth deficit of $3.7 billion as of December 31, 2017. To eliminate the net worth deficit, Fannie Mae said it expects the Director of the Federal Housing Finance Agency or FHFA will submit a request to Treasury on the company's behalf for $3.7 billion.

Net revenues for the year rose to $22.96 billion from $22.26 billion last year.

Fannie Mae noted that as it had a net worth deficit of $3.7 billion as of December 31, 2017, no dividend will be payable by it to Treasury for the first quarter of 2018.

Looking ahead, Fannie Mae expects its future net income will benefit from the lower federal corporate income tax rate. The company expects its effective tax rate to be about 20 percent in 2018.

In December 2017, the FHFA entered into an agreement with Treasury on Fannie Mae's behalf that modified the dividend provisions of the senior preferred stock.

The agreement increased the applicable capital reserve amount to $3.0 billion, effective January 1, 2018, and reduced the dividend amount otherwise payable for the fourth quarter of 2017 by $2.4 billion.

In addition, the amended dividend provisions of the senior preferred stock provide that, if Fannie Mae does not declare and pay a dividend in the full amount provided for in the senior preferred stock for any future dividend period, the capital reserve amount will thereafter be zero.

In his December 21, 2017 statement announcing the reinstatement of the $3.0 billion capital reserve, the Director of FHFA noted that FHFA contemplates that going forward Fannie Mae and Freddie Mac dividends will be declared and paid beyond the $3.0 billion capital reserve in the absence of exigent circumstances.

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