Fannie Mae is preparing to the cut a dividend check to the U.S. Treasury for $59.4 billion due to its decision to recognize deferred tax assets that have been sitting on the GSE’s books since it was placed in conservatorship back in September 2008.
The controversial decision to recognize the DTAs has political ramifications in terms of GSE reform legislation as well as federal deficit talks.
Fannie chief executive Tim Mayopoulos said the company weighed a number of complex financial factors in deciding to recognize the DTA allowance valued at $50.6 billion.
“We determined that the factors in favor of releasing the DTA valuation allowance outweighed the factors in favor of maintaining it,” the CEO told reporters in releasing Fannie’s first-quarter results.
Fannie postponed recognition in the fourth quarter because of concerns it would reduce the GSE’s line of credit at the U.S. Treasury. But changes to the assistance agreement last year eliminated such a cutoff in the first quarter.
The $50.6 billion DTA dividend and Fannie’s regular quarterly dividend payment to Treasury will total $59.4 billion.
Freddie Mac announced its earnings on Wednesday and company officials indicated they have no plans to recognize Freddie’s DTA allowance any time soon.
Meanwhile, Fannie posted first-quarter pretax earnings of $8.1 billion—the largest in the company’s history—and up from $7.6 billion in the prior quarter. It marked the fifth consecutive quarterly profit for the GSE.
Chief financial officer David Benson noted that Fannie is benefiting from lower delinquencies, rising house prices and fair value gains from various financial instruments.
The first-quarter results included $800 million from a $3.6 billion settlement with Bank of America involving the repurchase of B of A and Countrywide loans. That settlement was announced back in January.
