Fannie Mae is on a roll, reporting a second-quarter profit of $5.1 billion, compared with $2.7 billion in the first quarter. It's the largest profit since the nearly $142 billion taxpayer bailout of Fannie Mae and Freddie Mac in 2008. Freddie Mac reported a $3 billion profit, compared with $577 million in the first quarter.
The higher profits are attributed to rising home prices and a reduction in loan-loss provisions. The two mortgage companies also have tightened lending standards since 2009, leading to better-quality loans.
Fannie Mae moved $3 billion out of its loss-reserve account in anticipation of fewer losses going forward. The company has not asked the Treasury Department for financial assistance for two quarters in a row, leading some analysts to take this as further proof that the housing market is stabilizing at last.
In a statement, Timothy J. Mayopoulos, chief executive of Fannie Mae, said: "While it is too early to declare a national housing recovery and our results for the second half of 2012 may not be as strong as the first half, we expect our financial results in 2012 to be substantially better than the past few years."
There are a couple of hurdles ahead before the year is out: Buying activity typically slows in the second half of the year, and there is a backlog of foreclosed homes to sell, both of which could lower future earnings.
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