Fannie Mae posts $2B profit for 3Q; paying $2.2B dividend

The government rescued Fannie and smaller sibling Freddie Mac after they suffered huge losses from risky mortgages in the housing market bust.

The company said the loss — compared with net income of $2.1 billion a year earlier — mainly reflected accounting measures for the losses, while its business was strong and continue to improve.

Volatile interest rates and reduced capital cushions for the two companies, under their agreements with the government, "will likely make both enterprises increasingly susceptible to the possibility of quarterly losses that could result in draws" from the Treasury, Mel Watt, director of the Federal Housing Finance Agency, said in a statement Tuesday.

Fed Chair Janet Yellen said in congressional testimony Wednesday that an interest rate hike in December is a "live possibility" if the economy stays on track.

Despite the low borrowing rates that could lure prospective homebuyers, the market has remained hampered by tight mortgage credit, rising home prices and stagnating incomes.

Investors would pay fees in exchange for insurance on mortgage securities they buy, and the government would become a last-resort loan guarantor.