Strong fourth quarter financial results for Fannie Mae and Freddie Mac

GSEs see big jumps in net worth as they build capital toward release

Fannie Mae and Freddie Mac both reported strong fourth quarters in 2020, ending on a strong note despite lower full-year net incomes due to COVID-related losses.

Fannie reported a net income of $4.6 billion during the fourth quarter, with Freddie logging a net income of $2.9 income during the same period. That amounts to an 8% quarter-over-quarter increase for Fannie, while Freddie realized a larger 18% gain, driven by a reserve release due primarily to fourth-quarter home price growth.

Fannie’s Q4 comprehensive income was essentially even with its net income at $4.6 billion, while Freddie’s came in slightly lower than its net income at $2.5 billion.

For the full year of 2020, Fannie reported a net income of $11.8 billion, down 16% from the prior year’s total net of $14.2 billion due chiefly to a stark drop in credit-related income thanks to COVID-19. Still, revenues for Fannie grew from $18.5 billion in 2019 to $21.9 billion in 2020, driven by record levels of refinance activity.

The refi boom helped fuel Fannie’s single-family refinance volume of $948 billion in 2020, reaching its highest level since 2003. The hefty amount of refinances pushed Fannie’s total single-family acquisition in 2020 to $1.4 trillion, up 135% from 2019 to reach the enterprise’s highest on record.

Fannie Mae CEO Hugh Frater said that, while 2020 presented the nation an unprecedented test, Fannie “rose to the challenge.”

“I am proud of our work to help homeowners and renters through the pandemic, our commitment to advance opportunity and equity for families across the country, and our necessary focus on safety and soundness,” he said. “We will work with out mortgage industry partners to provide home financing to creditworthy borrowers in all market conditions and support the responsible exit from conservatorship.”

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Freddie, meanwhile, reported a full-year net income of $7.3 billion, managing a 1% year-over-year increase despite the negative impacts of COVID-19. As with Fannie, Freddie’s full-year total net was negatively impacted by significant credit-related losses, but the company saw an increase in net revenues, up to $16.7 billion in 2020 from $14.1 billion in 2019.

Significantly, Freddie reported new business activity of $1.1 trillion, bounding a whopping 141% annually thanks to higher activity on both the purchase and refi fronts. Freddie’s single-family and multifamily guarantee portfolios grew 17% and 15%, respectively, year over year.

“In 2020, Freddie Mac continued to serve the important role for which it was founded: supporting the housing market in all economic conditions,” said Freddie Mac Chief Financial Officer Christian Lown. “In the face of extraordinary economic uncertainty caused by COVID-19, we provided record liquidity, enabling millions of borrowers to purchase or refinance homes at historically low interest rates. We also helped hundreds of thousands of homeowners and renters affected by the pandemic avoid foreclosure and eviction.”

Fannie reported a 2020 year-end net worth of $25.3 billion, up $10.7 billion from 2019. Freddie’s net worth also jumped, closing 2020 at $16.4 billion after ending 2019 at $9.1 billion. For the first time since entering government control, the two enterprises have no cap to building their net worth; previously, the two each had a pre-determined net worth ceiling before they had to resume making dividends to the U.S. Treasury Department. That threshold, however, has been waived so Fannie and Freddie can build capital cushions to clear the way for a release from conservatorship.


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