(Adds details on earnings, executive comments, background)
Aug 2 (Reuters) - Fannie Mae said on Thursday its earnings rose in the second quarter from a year ago on higher interest income and a decline in federal tax payments, allowing it to pay $4.5 billion dividend to the U.S. Treasury by September.
The No. 1 U.S. mortgage finance agency said its net income totaled $4.457 billion in the second quarter, up from $3.2 billion the same quarter in 2017.
Fannie and its smaller sibling Freddie Mac make money by charging fees to guarantee loans on single-family homes and apartment buildings made by banks and other lenders. They also earn income from investing in mortgage and related securities.
“Our strong quarterly results reflect solid fundamentals in our single-family and multifamily businesses," Fannie Mae president and chief executive Timothy Mayopoulos said in a statement. “Both segments are managing and distributing risk in sustainable, efficient, and innovative ways, and our guaranty book remains robust and stable."
In September 2008, the government took control of Fannie and Freddie in a $187 billion bailout after they were exposed to soured subprime mortgages during the global credit crisis. The two agencies hand over their profits to the U.S. Treasury under the terms of the conservatorship.
Through the second quarter, Washington-based Fannie has paid $167.3 billion to the Treasury.
On Tuesday, Freddie Mac said it will pay $1.6 billion to the Treasury.
Fannie's net interest income was $5.377 billion in the second quarter on higher guarantee fees, up from $5.002 billion in the year-ago quarter.
It booked $229 million in net fair value gains, compared with a loss of $691 million the year before.
"Net fair value gains in the second quarter of 2018 were driven primarily by price decreases during the quarter on long-term debt of consolidated trusts held at fair value," it said.
It paid $1.136 billion in federal taxes, down from $1.587 billion a year earlier. (Reporting by Richard Leong; Editing by Meredith Mazzilli)