Fannie Mae reported comprehensive net income of $5.4 billion in the second quarter, a stunning 74% improvement from 1Q12 and will require no financial assistance from the U.S. Treasury Department.

After paying the government a $2.9 billion dividend, the company walked away with $2.5 billion in profits that it can keep.

In the post conservatorship era of the company, it marks the GSE’s largest profit to date. It is also the second quarter in a row in which Fannie did not need to borrow from the Treasury to pay its dividend to Uncle Sam.

The company, a ward of the government since September 2008, entered the third quarter with a net worth of $2.8 billion.

Fannie president and chief executive Timothy Mayopoulos attributed the increase in profitability to the improvement in home prices, better sales prices on REO, and declining loan delinquencies.

“With our high-quality new book of business and diminishing legacy expenses, Fannie Mae has a strong potential earning power that can deliver considerable value to taxpayer over the long term,” the Fannie CEO said in a press statement.

The second market agency recorded $3.1 billion in credit-related income in the second quarter compared to a $2.3 billion loss in the first quarter.

Fannie accumulated $76.9 billion in loan loss reserves by yearend 2011 and company executives believe they are now adequately reserved for loan losses.  As of June 30, the GSE had $68 billion in loan loss reserves.

On Tuesday Freddie Mac posted solid earnings of $1.1 billion in the second quarter – after paying Treasury $1.8 billion in dividends on the preferred stock it owns.

Freddie too will require no financial assistance from the government for the quarter and now has a net worth of $1.1 billion.

The preferred stock Treasury owns in the GSEs carries a junk bond-like yield of 10%.

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