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60 | Th e M Rep o RT O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SECONDARY MARKET the latest Profits shrink at Fannie mae The GSe expects continued yearly profits but anticipates they will be 'substantially lower' than those reported in 2013. m ortgage behemoth Fannie Mae is set to pay the U.S. Treasury nearly $2 billion in March after another profitable quarter. The company released its fourth-quarter earnings last month, posting a net income of $1.3 billion. That compares to a profit of about $6.5 billion a year ago. For all of 2014, Fannie reported profits totaling $14.2 billion, down from $84 billion in 2013. Like its sister company, Freddie Mac, Fannie's 2013 results got a major boost from a one-time benefit related to deferred tax assets and a surge in funds from securities settlements. Also like Freddie, Fannie's fourth-quarter results reflect losses on risk management derivatives stemming from a decline in interest rates. Based on its net worth—about $3.7 billion—Fannie said it will pay $1.9 billion in dividends to Treasury, per the terms of the GSEs' amended bailout agreement. As of March, the company will have paid a total of $136.4 billion to taxpayers on the $116.1 billion it drew as a result of the financial meltdown. Dividend payments don't reduce from the prior total— meaning Fannie will continue pay- ing each quarter for the time being. "Today's announcement by Fannie Mae CEO Tim Mayopoulos that Fannie's fourth quarter earnings fell by 66 percent and that it may need to later take a capital draw from the U.S. Treasury should serve as a wake-up call to Congress to move quickly to advance housing finance reform," said Tom Woods, chair- man of the National Association of Home Builders. "A promising start was made in the last Congress when a bipartisan group of senators advanced legisla- tion out of the Senate Banking Committee that would maintain an appropriate level of government backing to preserve financial stabil- ity and promote investor confidence. Lawmakers need to build on those efforts. The time to act is now while Fannie Mae and Freddie Mac remain in relatively good financial health, and not to kick the can down the road and wait until a possible crisis develops." Even as income slowed down in the fourth quarter, Fannie said it expects to continue pulling in a profit on an annual basis for the foreseeable future. At the same time, the company warned that earnings in future years are likely to be "substantially lower" than 2014 as settlements stop rolling in and the company continues to shrink its presence in the marketplace. Moderating home prices are also expected to add some volatility from quarter to quarter, Fannie said. Ocwen to sell $9.8 Billion msr Portfolio to nationstar ocwen Ceo says the company may transfer more MSR portfolios to Nationstar in the future. O cwen Loan Servicing, a subsidiary of Ocwen Financial Corporation, intends to sell the mortgage servicing rights (MSR) on a portfolio of performing residential loans owned by Freddie Mac with a total principal balance of about $9.8 billion to Nationstar Mortgage, a subsidiary of Nationstar Mortgage Holdings, according to an announcement from Ocwen Financial in late February. There are approximately 81,000 loans in the portfolio involved in the transaction, according to Ocwen's announce- ment. The transaction is subject to a definitive agreement and approval from Freddie Mac as well as Freddie Mac's conserva- tor, the Federal Housing Finance Agency (FHFA). "We are pleased to enter into an agreement to acquire this portfolio from Ocwen," said Jay Bray, CEO of Dallas, Texas-based Nationstar. "We look forward to expeditiously closing this portfolio and welcome the new customers to Nationstar." Ocwen's regulatory troubles over the last year have been well- documented. The Atlanta-based nonbank mortgage servicer agreed to a $150 million settlement with the New York Department of Financial Services in December. That settlement included the departure of chairman Bill Erbey, who founded the company more than 30 years ago. In early February, Ocwen CEO Ron Faris told his company's stakeholders he expected the company's Q 4 earnings to take a hit based on mounting regulatory pressures, expenses, and ratings downgrades by Fitch Ratings and Morningstar Credit Ratings. Faris said the recently an- nounced deal with Nationstar could be only the beginning of MSR transactions between the two companies. "This transaction represents the first step in the execution of our previously announced strategy to transfer certain types of non-strategic servicing," Faris said. "We look forward to ex- ploring additional MSR transac- tions with Nationstar." The company warned that earnings in future years are likely to be 'substantially lower' than 2014 as settlements stop rolling in.

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