MD&A | Consolidated Results of Operations
The following factors impacted our provision for credit losses in the third quarter of 2017:
The estimate of incurred losses from the 2017 hurricanes contributed to the provision for credit losses.
This was partially offset by a benefit primarily due to higher actual home prices.
In addition, we recognized a benefit from the redesignation of certain reperforming single-family loans from HFI to HFS during the period.
The following factors impacted our benefit for credit losses in the first nine months of 2017:
We recognized a benefit for credit losses due to higher actual and forecasted home prices in the period.
In addition, we recognized a benefit from the redesignation of certain reperforming and nonperforming single-family loans from HFI to HFS during the period.
This was partially offset by the estimate of incurred losses from the 2017 hurricanes.
Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) Fees
Pursuant to the TCCA, FHFA directed us to increase our single-family guaranty fees by 10 basis points and remit this increase to Treasury. This TCCA-related revenue is included in “Net interest income” and the expense is recognized as “TCCA fees” in our condensed consolidated financial statements. TCCA fees increased in the third quarter and first nine months of 2018 compared with the third quarter and first nine months of 2017 as our book of business subject to the TCCA continued to grow. We expect the guaranty fees collected and expenses incurred under the TCCA to continue to increase.
Federal Income Taxes
The decrease in our provision for federal income taxes in the third quarter and first nine months of 2018 as compared to the third quarter and first nine months of 2017 was the result of the Tax Cuts and Jobs Act of 2017, which reduced the federal statutory corporate income tax rate from 35% to 21% effective January 1, 2018. This decline was the primary driver of the reduction in our effective tax rate to 20.7% for the third quarter of 2018 and 20.6% for the first nine months of 2018, compared with 33.5% for the third quarter of 2017 and 33.3% for the first nine months of 2017. Our effective tax rates for all the periods presented were different from the prevailing federal statutory rate primarily due to the benefits of our investments in housing projects eligible for low-income housing tax credits.
Fannie Mae Third Quarter 2018 Form 10-Q