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This is MORNING EDITION from NPR News. I'm David Greene.
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And I'm Steve Inskeep. Fannie Mae has reported its largest annual profit ever. The mortgage giant reported that big gain in 2012 after years of losses and a federal bailout. NPR's Yuki Noguchi has more.
YUKI NOGUCHI, BYLINE: For years, Fannie Mae was the emblem of a housing market gone bad. It had backed soured mortgages, amplified an historic housing crisis, and took massive amounts in taxpayer bailouts. For all of last year, Fannie posted net income of $17.2 billion.
Just a year earlier, it had lost nearly the same amount. It wasn't just profitable; in all of last year, Fannie delivered more than $11.5 billion in dividend payments to taxpayers. Fannie remains deep in the hole from the $116 billion in bailouts it received. But it's being helped by a housing market that's lifting home prices as well as a better job market, both of which are tamping down the foreclosure crisis. Susan McFarland is Fannie Mae's chief financial officer.
SUSAN MCFARLAND: We are pleased that we are benefiting from it, but we are also pleased with the work we have put in, in order to - hopefully - help support the housing recovery.
NOGUCHI: McFarland says an increasing percentage of Fannie's business is now new loans, ones underwritten after 2009, under much stricter lending standards. Those generate cash and create virtually no foreclosure drama. At the same time, it has unwound much of the bad business it did leading up to the crisis. The delinquency rate on those old loans has gone from over five percent to about three percent.
MCFARLAND: We expect that we'll see a positive trend. In other words, you'll continue see our serious delinquency rate declining over time.
NOGUCHI: Karen Shaw Petrou is an analyst who follows Fannie Mae.
KAREN SHAW PETROU: Better than before.
NOGUCHI: That's how she describes Fannie's current condition. Better, but not clear sailing. She says Fannie's future isn't certain because the government still has to make big choices and big changes to its role in housing finance. Right now, Fannie, along with its smaller sibling Freddie Mac, and the Federal Housing Administration, guarantee nearly all home loans in the U.S.
PETROU: Together with FHA, Fannie and Freddie now control well over 90 percent of mortgage finance in the United States. And that means the taxpayer is backing each one of our mortgages. We could do that, I guess, but it's not the kind of free-enterprise system we want.
NOGUCHI: Petrou says a number of things could reshape the current dependence on government-backed guarantees. The government could cap guarantees at middle-income levels. Or, it could find a way to get private investors to share the risk. With gridlock in Washington, however, those decisions aren't even being discussed, much less decided.
Fannie Mae chief financial officer Susan McFarland agrees she wants Fannie to play less of a role in the U.S. housing market in the future.
MCFARLAND: Our goal is actually to reduce our overall market share and have private capital step back in. We are starting to see some very limited, early indications that private capital may be starting to come back in, in a limited way.
NOGUCHI: But right now, she says, Fannie still guarantees about half of all U.S. mortgages. Yuki Noguchi NPR News Washington. Transcript provided by NPR, Copyright NPR.