Tax reform drives Fannie Mae net income decline in Q4

by Francis Monfort16 Feb 2018

Recently passed tax reform legislation was the primary driver of the year-over-year and quarter-over-quarter declines in Fannie Mae’s net income.

The company reported a fourth-quarter net loss of $6.53 billion, compared with net income of $3.02 billion in the third quarter. For the full year, the net income was $2.46 billion, down from $12.3 billion in 2016.

Fannie Mae said both declines were primarily driven by a $9.96 billion provision for federal income tax in the fourth quarter following a remeasurement of its deferred tax assets. As a result, the company recorded a net worth deficit of $3.7 billion as of Dec. 31, 2017. Given the deficit, Fannie Mae expects the Federal Housing Finance Agency to submit a request to Treasury to cover the deficit.

Fannie Mae’s pretax income was $18.45 billion in 2017, compared with $18.33 billion in 2016.

“Our 2017 results demonstrate that the fundamentals of our business are strong. While the fourth quarter was affected by a one-time accounting charge, we expect to benefit from a lower tax rate going forward,” President and CEO Timothy Mayopoulos said.

The company said it expects its future net income will benefit from the lower federal corporate income tax rate. Fannie Mae expects its effective tax rate to be approximately 20% in 2018.


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