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TH E M R EP O RT | 61 SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T TH E M R EP O RT | 61 Fannie Mae Reports Q3 Earnings The GSE attributed its quarter over quarter drop due to credit-related expense caused by hurricane-related provisions for credit losses. I n Q 3 2017 Fannie Mae re- ported that although some of its credit-related expense was eased by a recent legal settlement, its net income dropped by $177 million, ending up at $3 billion. The drop compared to last quarter was due primarily to credit-related expense princi - pally caused by hurricane-related provisions for credit losses. An increase in credit-related expense was partly offset by income from a settlement agreement related to private-label mortgage-related securities Fannie Mae previously purchased. Since the GSE reported a posi - tive net worth of $3.6 billion as recent as September 30, 2017, they will pay the Treasury a $3 billion dividend in December this year if the Federal Housing Finance Agency (FHFA) declares a dividend in that amount. Fannie Mae reported a comprehensive income of $3 billion for the third quarter. The GSE also paid $165.8 billion in dividends to the Treasury in Q 3 and a $3.1 billion dividend in September 2017. "As our third quarter results demonstrate, our performance and focus on customers have put us in a strong position to continue serving all parts of the market," said Timothy J. Mayopoulos, Fannie Mae's President and CEO "We are committed to working with customers to forge a stronger and safer housing finance system that provides opportunities that are affordable to the next genera - tion of American homeowners and renters." Providing around $150 billion in mortgage financing, Fannie Mae is the largest provider of liquidity to the mortgage market in Q 3 2017. The GSE enables families to buy, refinance, or rent homes by making 30-year fixed- rate mortgages and credit access more available. As Fannie Mae transitions to a guaranty-focused business from a mortgage-portfolio focused one, it's worth noting that more than 75 percent of the company's net income in the first nine months of 2017 has come from Fannie Mae's guaranty business. "Fannie Mae is consistently delivering a steady stream of in - novations to our customers. We see their challenges as Fannie Mae's challenges, and we are lis- tening to their feedback to make our customer solutions better and smarter," said Mayopoulos. Freddie Mac Reports Solid Gains The GSE provided just shy of $300 billion in liquidity to the mortgage market through Q3 2017. F reddie Mac released its Q 3 financial statement, reporting solid gains in the quarter and declaring a net worth of $5.3 billion and a compre - hensive income of $4.7 billion. That income was driven by a $2.9 billion (after-tax) benefit from a non-agency, mortgage- related securities litigation settle - ment. Excluding that settlement, Freddie reported a $1.8 billion profit for the quarter. Like its comprehensive in - come, Freddie's net income in Q 3 was also $4.7 billion; its net and comprehensive incomes rep- resent increases of $3 billion and $2.7 billion, respectively, over the second quarter. Both increased $2.3 billion from the prior year. "We clearly had a strong quar - ter," said Freddie CEO Donald Layton. He said the profit in the face of litigation "reflects the growing strength of our business model, as well as an improving quality of execution." Freddie's total guarantees portfolio for Q 3 finished close to $2 trillion, 5 percent higher than in Q 3 of 2016, that despite a 15 percent drop in its total investments portfolio, which finished the quarter at $349 billion. Freddie's total mortgage- related investments portfolio also declined by 13 percent to $267 billion, compared to a year ago. The GSE this year has provided just shy of $300 billion in liquidity to the mortgage market through Q 3 2017. It also has returned $8.7 billion in aggregate cash dividends to the U.S. Treasury so far this year. Cumulative since 2008, that amounts to $110 billion returned, or almost $39 billion more than cumulative cash draws of $71.3 billion received from the Treasury. Freddie also reported a lingering, if diminishing, capital reserve of $600 million as of the end of September. The capital reserve is expected to be zero by January 1. "We're better at managing our risks, better at disposing of legacy assets, and getting better all the time at serving our customers," Layton said. "We're proud of this transformation, and we're com - mitted to getting even better." "We're better at managing our risks, better at disposing of legacy assets, and getting better all the time at serving our customers." —Donald Layton, Freddie Mac CEO

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