Fannie/Freddie Report Lower Quarterly Revenues, Profits

Fannie Mae and Freddie Mac (the GSEs) reported their respective third quarter 2021 financial results on Friday. Both posted significant increases in net income from the same period in 2020 but results for each were lower than reported in Quarter Two.

Fannie Mae says it had $4.8 billion net income for the third quarter of 2021, down from $7.2 billion in the second quarter but an increase of 14 percent from the $4.2 billion net in the third quarter of 2020. Income declined from $8.4 billion in the prior quarter to $7.1 billion but this was up 5.0 percent compared to the $6.8 billion in net revenues a year earlier. The company said the quarter-over-quarter decline was driven by lower net interest income and a $1.7 billion drop in credit related income.

The credit related component was impacted by a decrease in the volume of loan redesignations, less benefit from both actual and forecasted home price growth, and increased interest rates. Interest income was lower due to a decline in mortgage prepayments although refinance activity remained strong.

The company's net worth increased from $37.4 billion in Quarter Two to $42.2 billion. The company, however, said it remains significantly undercapitalized.

The company provided $312.7 billion in liquidity to the single-family and multifamily mortgage markets during the quarter. That included funding $115.4 billion of single-family home purchases, nearly half of which were homes purchased by first-time buyers. In the second quarter single-family purchases totaled $129.5 billion. The company also funded 166,000 units of rental housing. More than 90 percent of those units were affordable by families earning at or below 120 percent of the local area's median income.

The company's servicers granted forbearance to about 1.4 million single-family homeowners during the COVID-19 pandemic. As of September 29, 2021, 1.2 percent of the single-family guaranty book, 206,293 loans, remained in forbearance plans. Of the 1.2 million homeowners who have exited program, 727,000 have reinstated or paid off their loans and 359,000 have taken advantage of the payment deferral option.

The single-family delinquency rate at the end of the reporting period was 1.62 percent, down from 2.08 percent at the end of the prior quarter. But serious delinquencies, excluding loans in forbearance, increased from 0.64 percent to 0.72 percent over that same period, primarily due to loans exiting forbearance without resolution of their non-current status.

Freddie Mae reports that its net income increased 19 percent year-over-year to $2.9 billion on revenues of $5.2 billion. Those numbers, however, were down from net income of $3.6 billion and revenues of $5.9 billion in the second quarter of this year.

The company's mortgage portfolio has grown from an unpaid principal balance of $2.2 trillion in the third quarter of 2020 to $2.7 trillion at the end of the most recent reporting period.

Freddie Mac funded 1.027 million mortgages during the quarter, down slightly from both earlier periods. However, the number of purchase mortgages increased by 100,000 compared to the second quarter, with about the same decline in refinancing volume. First time homebuyers purchased about 46 percent of the 600,000 homes funded.

The company also provided financing for 161,000 multifamily rental units. Sixty-eight percent of those units were affordable to those earning less than 80 percent of the area median income.

At the end of the quarter, 1.15 percent of the company's single-family loans were in forbearance, down from 2.95 percent a year earlier. Loan workout activity decreased to 73,000 loans from 193,000 in the third quarter of 2020, primarily because of a decline in completed forbearance plans and payment deferrals related to the pandemic.

The company's net worth rose from $14.9 billion in the third quarter of last year to $25.3 billion.