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16 EARNINGS SEASON THE SECOND QUARTER REPORT CARD FANNIE MAE'S NET INCOME SURGES IN Q2, BUT STILL LAGS LAST YEAR'S PACE Fair value gains were the primary driver as Fannie Mae's net income more than doubled from the first quarter to the second quarter, according to an announcement from Fannie Mae in early August. e GSE's net income for Q2 was $4.6 billion, compared to $1.9 billion in the first quarter, totaling $6.5 billion for the year. Despite the substantial quarter-over-quarter increase in net income, Fannie Mae is still slightly behind last year's pace, when the GSE reported a net income of $14.2 billion for the year. Fannie Mae's net income in 2013 was $84 billion. e quarter-over-quarter increase in net income for Q2 2015 was largely driven by fair value gains, offset by credit-related expense that was negatively affected by an increase in interest rates. Fannie Mae's net fair value gains in Q2 totaled $2.6 billion, compared with losses of $1.9 billion in Q1. Increases in longer term interest rates that positively impacted the value of Fannie Mae's risk management derivatives were largely responsible for the fair value gains in Q2. Fannie Mae's provision for federal income taxes for Q2 was $2.2 billion, reflecting an effective tax rate of 32 percent. e enterprise's comprehensive income for Q2 was $4.4 billion, compared to $1.8 billion for the previous quarter and $14.7 billion for all of 2014. "We reported another strong quarter of financial performance with solid revenues and an impressive book of business that only continues to improve. We have reduced the risk of our business and have made great strides in transferring credit risk to private capital to bet- ter protect taxpayers," said Timothy J. Mayo- poulos, president and CEO of Fannie Mae. "We are committed to serving our customers and the market with solutions that promote simplicity and certainty. We are creating revolutionary new tools, products, and solu- tions—and enhancing our existing foundational resources—to support our lenders. We continue to make changes throughout our company that improve the way we work and increase the value we provide to the housing finance system." Fannie Mae also announced it will pay a dividend of $4.4 billion to the Department of Treasury in September, bringing the total dividend payment to Treasury to $142.5 billion, about $26.4 billion more than Fannie Mae received in the 2008 bailout from Treasury ($116.1 billion). e enterprise provided about $144 billion in liquidity to the mortgage market in Q2, which enabled families to buy, refinance, or rent homes. Fannie Mae also helped 34,000 distressed families avoid foreclosure or retain their homes through loan workouts during Q2, using both Fannie Mae's proprietary programs and other government-sponsored programs such as the Home Affordable Mortgage Program. Q2 marked the 21 st consecutive quarter of declines for the single-family serious delinquency rate in Fannie Mae's book of business. e rate was reported at 1.66 percent in Q2 and has declined every quarter since Q1 2010, when it was reported at 5.47 percent. "is decrease is primarily the result of home retention solutions, foreclosure alternatives and completed foreclosures, improved loan payment performance, as well as the company's acquisition of loans with stronger credit profiles since the beginning of 2009," Fannie Mae said in the report. Fannie Mae said despite the steadily decreasing number of single-family seriously delinquent loans in its book of business, the enterprise expects the single-family serious delinquency rate to remain above pre-2008 levels for years due to many factors, including the length of time required to complete foreclosures in some states, pace of loan modifications, timing and volume of future sales the enterprise makes of non-performing loans, as well as changes in home prices, unemployment levels, and other macroeconomic conditions. Fannie Mae and Freddie Mac will pay a combined dividend of $8.4 billion in September, bringing the total net amount returned to taxpayers by the Enterprises up to $51.6 billion after paying back Treasury for the $187.5 bailout they received in 2008, according to the GSEs. KNOW THIS