Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA)‘s latest earnings report is a reminder about the its fading rewards in a recovering housing market. The first-quarter report of the housing company stated net income to the tune of $1.9 billion, which came 64% lower over a year ago. At the same time, the company’s profits from its mortgage guaranty business dropped 30% to $2.1 billion.

Losing profitability

The company’s earnings stood at $10.8 billion over the last four quarters, which is impressive as a company. However, it profits are on a decline since last two-quarters due to its exposure to interest-rate risk. Like its sibling, Freddie Mac, Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) reported that the low-interest rates led to decline in the fair value of its derivatives, amounting $1.9 billion during the quarter. However, the said loss stood adjusted with $1.5 billion profits from its securities portfolio.

Again, Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA)’s revenues also fell 41% to $5.4 billion, indicating the company’s efforts to trim down its mortgage-backed securities, which is at $411 billion. The quarter denoted the first time in last seven years when the company has generated less than half of its revenues from mortgage-backed securities. The same is expected to come further down so as to comply with the bailout agreement that has set a target of $250 billion by 2018.

Bitter reality

Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) has also remarked that it will continue to be profitable on an annual basis, but the percentage of its profitability will decrease with each passing year. The statement is enough to conclude that the time is nowhere near when Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) can be recapitalized from its own earnings and will be freed from the government’s conservatorship.

The stock of Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) fell 1.03% to $2.89 on Thursday, while 4.52 million shares traded hands.