Could Fannie Mae really be profitable on a consistent basis, in the coming years?

Fannie Mae released its third quarter balance sheets a couple weeks ago, and the $5.1 billion loss – accompanied by a plea for $7.8 billion in additional government financing – chaffed more than a few observers, leading to further calls for GSE to be either fully privatized or liquidated.

That atmosphere, though, was not present in company CEO Michael Williams’ testimony before Congress, earlier today; in fact, William even used the word “profitability.”

According to a report filed by HousingWire’s Jacob Gaffney, Williams said that the “loss mitigation efforts” for the troubled mortgages of 2005 to 2008 are working, and as a result, Fannie’s portfolio of the toxic assets (which includes foreclosures) is shrinking. As that number decreases, and the company’s stock of higher-quality mortgages from 2009 to the present day increases, the company will return to profitability.

Going forward, Williams said that Fannie has developed further tools to ensure greater quality of loans.

“We are developing new tools and standards to ensure greater visibility into the quality of the loans that are delivered into the secondary market,” Williams said, in Gaffney’s piece. “This loan quality initiative will reduce the risk for the lender, the investor, the borrower, and ultimately the taxpayer.”

Fannie Mae turned a $73 million profit in the fourth quarter of 2010, and it was the first time since 2007 that the company had finished a quarter in the black. That profitability, though, came after a third quarter loss of $1.3 billion, and this most recent quarterly loss comes after analysts boldly claimed that the GSE would be profitable by the end of 2011. Are we in store for another fourth quarter, Christmas miracle from Fannie?