Fannie Mae reported a dip in net income as part of its latest earnings report due to a lower credit-loss benefit, causing trading activity in its shares to waver.
The government-sponsored enterprise, which accounted for 27% of the single-family securities issued in the U.S. during the past year, recorded $17 billion in net income for 2024, lower than the $17.4 billion it generated in 2023.
"We recorded a $186 million benefit for credit losses in 2024. This lower benefit compared to 2023 was the primary driver of our decrease in net income," Chief Financial Officer Chryssa Halley said during the enterprise's earnings call.
In comparison, competitor Freddie Mac had announced $11.9 billion in annual earnings a day earlier, representing its
Policymakers will look closely at both GSEs' metrics as they consider removing their government ties. The enterprise's financials must be sound enough for a release and will be key to resolving investor and taxpayer interests tied up in the GSEs' agreement with the government.
The enterprise had a $146 billion deficit between available risk-based capital and its regulatory minimum during the quarter. It's been narrowing this but has a large gap to close because the $120.8 billion stated value of its senior preferred stock is excluded from regulatory capital.
"We grew our net worth to nearly $95 billion, further increasing our financials, and over the past two years, we have built nearly $37 billion of regulatory capital," President Priscilla Almodovar said during the call.
For the quarter, Fannie earned $4.1 billion, compared to $4 billion
"Net revenues remain strong at $29 billion thanks to healthy guarantee fee income of $23 billion. Non-interest expenses were $9.8 billion, relatively flat to 2023," Halley said, referring to the fees it charges to back the loans sold to it.
A possible change in the status of Fannie and Freddie's guarantees, which have had more explicit ties to the government than they originally had in conservatorship, has been the key point in debates about how any release from conservatorship should be handled.
The government's backing has traditionally been tied to their support for U.S. housing.
Fannie acquired around 778,000 single-family home-purchase mortgages last year, about half of which went to first-time buyers, and also bought an estimated 207,000 refinance loans. It also financed some 420,000 home loans with five or more units.
Potential challenges and risks Fannie and Freddie face include possible loan performance issues and market limits.
Halley noted that Fannie's economists do not currently anticipate meaningful declines in the 10-year government bond yield that can be loosely indicative of mortgage rates and expect home sales to remain constrained.
Fannie's single-family serious delinquency rate, reflecting borrowers who were 90 days or more late on their mortgages or in foreclosure, ended 2024 just a basis point higher than a year earlier at 0.56%. The multifamily SDQ rate was 0.57%, up from 0.46% at the end of 2023.
While single-family home prices have been appreciating overall, there have been some declines in the multifamily sector. Executives also noted that Fannie has been working to manage some fraud risk in its book of business.
Shortly after the call, Fannie's stock was trading near $6.75 per share. It had traded in a range roughly between $6.70 and $6.90 as of around 10:30 a.m. on the East Coast and was trending toward the higher end.
