Update on Fannie & Freddie 2017 Performance

Both Fannie and Freddie have reported financial results for full year 2017. Below are some topics of interest:

U.S. Treasury Net Receipts and Return on Investment: With the revaluation of deferred taxes due to the recent lowering of corporate tax rates, both Fannie & Freddie will make draws from the U.S. Treasury. With these draws included, it is estimated that U.S. Treasury's cumulative return on the investment in Fannie & Freddie exceeds 10% with cumulative net payments to U.S. Treasury of over $87 billion.

Trends in Pro Forma Pre-tax "Adjusted" Earnings: With the requirement to wind down other investments and the cost to cover risk transfer programs impacting earnings, the following is an attempt to create a pre-tax adjusted earnings trends estimate for Fannie & Freddie. While there may be alternative approaches (this is my approach), generally this approach suggests that Fannie & Freddie are now generating pre-tax adjusted earnings in the $25 - $30 billion range annually.

Investments in Common Securitization Solutions and Related Projects: As progress continues on the Single Security and common securitization platform, Fannie & Freddie continue to make investments in Common Securitization Solutions LLC (CSS). Through Q4 2017, the cumulative investments in CSS totaled $658 million.

Affordable Housing Payments: And finally, Fannie & Freddie play a critically important role in support of affordable housing, including allocations to various housing trust funds. For 2017, these combined housing trust fund allocations accrued totaled $414 million. One of the other GSEs - Federal Home Loan Banks - also have assessments contributing to affordable housing, through Q3 2017, these assessments totaled $286 million. Combined these GSEs provide approximately $700 - $800 million annually to affordable housing through these allocations and assessments - critically important roles!