Fannie Mae (Federal National Mortgage Association, FNMA) is a government-sponsored, stockholder-owned corporation that operates in the U.S. housing finance system. The company provides liquidity, stability, and access to mortgage credit by working in the secondary mortgage market. Fannie Mae acquires residential mortgage loans from lenders, packages them into mortgage-backed securities (MBS), and guarantees payments to investors, earning revenue primarily through guaranty fees and net interest income.
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Single-Family - Operates in the secondary mortgage market for loans secured by properties with four or fewer residential units. Generates revenue through guaranty fees for assuming credit risk and net interest income from its retained mortgage portfolio and corporate liquidity portfolio.
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Multifamily - Operates in the secondary mortgage market for loans secured by properties with five or more residential units. Earns revenue from guaranty fees for assuming credit risk and net interest income from its retained mortgage portfolio and corporate liquidity portfolio.
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Initial Price$1.45July 1, 2024
Final Price$1.17October 1, 2024
Price Change$-0.28
% Change-19.31%
What went well
- $4 billion in net income in Q3 2024 increased Fannie Mae's net worth to $90.5 billion, strengthening financial stability.
- Provided $106 billion of liquidity to the single-family and multifamily markets, helping 383,000 households buy, refinance, or rent a home, including 117,000 first-time homebuyers.
- Maintained strong credit quality with a weighted average loan-to-value ratio of 77% and a weighted average credit score of 759 on single-family acquisitions, while single-family serious delinquency rates remained near historically low levels at 52 basis points.
What went wrong
- Increase in Multifamily Credit Losses and Serious Delinquencies:
- Declining Multifamily Property Values and Potential Fraud Investigation:
- Expected Increase in Single-Family Delinquencies Due to Economic Factors:
- The provision for credit losses in the multifamily segment increased due to ARM loans that were written down and an investigation into lending transactions with suspected fraud. Can you provide more details on these ARM loans and the nature of the suspected fraud impacting the portfolio?
- With expectations of slower economic growth and the anticipated increase in the single-family serious delinquency rate due to Hurricanes Helene and Milton, how is Fannie Mae adjusting its risk management strategies to mitigate potential credit losses in the near term?
- Given that housing affordability remains a significant challenge, with only 19% of surveyed individuals believing it's a good time to buy a home, what specific initiatives is Fannie Mae implementing to address affordability issues and stimulate existing home sales?
- In light of the projected decline in multifamily market origination volumes and the expectation of rent growth remaining below historical averages, how does Fannie Mae plan to manage its multifamily portfolio to maintain profitability and support affordable housing?
- The net income decreased to $4 billion this quarter from $4.5 billion in the previous quarter, partially due to smaller fair value gains. Can you elaborate on the factors that led to the decline in fair value gains and what measures are being taken to address this in future quarters?
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: FY 2024 and FY 2025
- Guidance:
- Home Sales: Expected to be 4.8 million units in 2024, increasing to 5.2 million units in 2025.
- Home Price Growth: Projected at 5.8% for 2024, slowing to 3.6% in 2025.
- Single-Family Mortgage Originations: Expected to grow from $1.5 trillion in 2023 to approximately $1.7 trillion in 2024, with purchases making up 78% of originations.
- Multifamily Market Origination Volumes: Expected to be roughly $275 billion in 2024, with a range between $245 billion and $315 billion.
- Rent Growth: Expected to remain below historical averages, in the range of 1% to 1.5% in 2024.
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: FY 2024
- Guidance:
- Multifamily Serious Delinquency Rate: Expected increase due to a portfolio of approximately $600 million of adjustable-rate conventional loans.
- Federal Reserve Rate Cuts: Economists expect two rate cuts later in 2024.
- Home Price Growth: Projected to rise 6.1% in 2024.
- Single-Family Mortgage Originations: Expected to grow to approximately $1.7 trillion in 2024, with purchases making up 80%.
- Multifamily Market Origination Volumes: Estimated between $245 billion and $315 billion in 2024.
- Multifamily Sales Activity and Property Values: Expected to remain subdued in the near term.
- Rent Growth: Expected to remain below historical averages, in the range of 1% to 1.5% in 2024.
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: FY 2024
- Guidance:
- Interest Rates: Expectation of two rate cuts from the Fed later in 2024.
- Home Prices: Expected to rise 4.8% in 2024.
- Single-Family Mortgage Originations: Expected to grow to approximately $1.8 trillion in 2024.
- Multifamily Market Origination Volumes: Estimated between $300 billion to $340 billion in 2024.
- Rent Growth: Expected to remain below historical averages, in the 1% to 1.5% range in 2024.
- Multifamily Property Values: Expectation of additional declines in the short term.
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- 30-Year Fixed Mortgage Rate: Expected to average 6.1% in 2024.
- Single-Family Mortgage Originations: Expected to grow to nearly $2 trillion in 2024.
- Multifamily Origination Volumes: Estimated between $295 billion and $325 billion.
- Rent Growth: Expected to remain below historical averages, in the range of 1% to 1.5% in 2024.
- Multifamily Housing Starts: Expected to decline in 2024.