Franklin Raines, vice chairman of the Federal National Mortgage Association, said the agency expects 1993 earnings to be at least 10% higher than those in 1992.

Fannie Mae reported a 1992 net of $1.6 billion, or $5.91 a share on a fully diluted basis.

Mr. Raines spoke at a meeting of financial analysts in Toronto last week. He told the group that Fannie Mae expects to post double-digit growth in earnings for the next five years.

Its total business volume "should approach, if not surpass," 1992's levels, Mr. Raines said. After the meeting, he said he expects volume of about $250 billion in 1993, compared with $257 billion in 1992.

Fannie Mae expects industrywide mortgage originations in the United States to be about $825 billion this year, drop off in 1994 then "rise slowly back up top the $800 billion [a year] level" later in the decade, Mr. Raines said.

Tax Decision Awaited

He said he is "expecting a decision soon" on the company's case in U.S. Tax Court.

The Internal Revenue Service interpreted the Supreme Court's 1988 decision in the Arkansas Best case to mean that most transactions for hedges of business risks are subject to capital gains treatment. Such hedges have long been treated as income.

Fannie appealed the IRS ruling. An unfavorable decision in Tax Court could cost it about $300 million and would certainly be appealed, Mr. Raines said.

On another topic, he said the recent appointment of a regulator to oversee Fannie Mae's operations is unlikely to slow the process of bringing new products to market. In most cases the agency would not need regulatory approval for a new product, he said.

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