Fannie Mae Reports $4.7B in Q3 Net Income

Fannie Mae has reported $4.7 billion in net income for the third quarter of 2023, with the net worth of the government-sponsored enterprise (GSE) reaching $73.7 billion as of September 30, 2023.

“The third quarter remained challenging for housing–with higher mortgage rates, high home prices, and a limited inventory of homes for sale,” said Priscilla Almodovar, CEO of Fannie Mae. “Renters, too, continued to face all-time high rents. Against this economic backdrop, Fannie Mae delivered strong third quarter results and remained a reliable source of liquidity and stability for America’s housing market. This quarter, we helped 428,000 households purchase, refinance, or rent a home, many of whom are low- to moderate-income borrowers or renters.”

Quarter-over-quarter, Fannie Mae reported that net income decreased $295 million in the third quarter of 2023, compared to second quarter of 2023, primarily driven by a decrease in benefit for credit losses, partially offset by an increase in fair value gains. Net interest income remained strong in Q3, primarily driven by base guaranty fee income.

The benefit for credit losses reported was $652 million in Q3, compared with $1.3 billion in Q2 of 2023. The benefit for credit losses for the third quarter of 2023 was primarily driven by increases in actual and forecasted single-family home prices. This was partially offset by write-offs relating to the redesignation of certain single-family loans from held for investment to held for sale.

Compounding affordability issues for potential U.S. homebuyers, the weekly average for the 30-year fixed-rate mortgage rate (FRM) increased from 6.71% at of the end of Q2 of 2023, to 7.31% at of the close of Q3.

Home prices grew 1.7% on a national basis in Q3 2023, compared with a 3.8% increase in the second quarter of 2023.

Fair value gains reported by Fannie Mae were $795 million in the third quarter of 2023, compared to $404 million in the second quarter of 2023. Fair value gains in Q3 were primarily due to increases in interest rates during the period.

The GSE provided approximately $106 billion in liquidity to the mortgage market in Q3, through the purchase of approximately 224,000 single-family purchase loans, of which more than 45% were for first-time homebuyers, and approximately 45,000 single-family refinance loans during Q3.

Fannie Mae financed approximately 159,000 units of multifamily rental housing in the third quarter of 2023, a significant majority of which were affordable to households earning at or below 120% of area median income, providing support for both workforce and affordable housing.

Key business highlights reported by Fannie Mae over Q3 included:

• Single-family conventional acquisition volume was $89.2 billion in Q3 of 2023, consistent with the second quarter of 2023. Purchase acquisition volume, of which more than 45% was for first-time homebuyers, increased to $78.2 billion in the third quarter of 2023 from $76.4 billion in the second quarter of 2023. Refinance acquisition volume was $11.0 billion in Q3, a decrease from $12.8 billion in the second quarter of 2023.
• The average single-family conventional guaranty book of business in Q3 of 2023 increased by $5.5 billion from the second quarter of 2023 driven by an increase in the average loan size of the book. Overall credit characteristics of the single-family conventional guaranty book of business remained strong, with a weighted average mark-to-market loan-to-value ratio of 51% and a weighted-average FICO credit score at origination of 753 as of September 30, 2023.
• The average charged guaranty fee, net of Temporary Payroll Tax Cut Continuation Act of 2011 (TCCA), on the single-family conventional guaranty book remained relatively flat at 47.0 basis points as of September 30, 2023, compared with 46.8 basis points as of June 30, 2023. TCCA fees refer to revenues generated by the 10 basis point guaranty fee increase the company implemented on single-family residential mortgages pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011, and as extended by the Infrastructure Investment and Jobs Act, the incremental revenue from which is remitted to Treasury and not retained by the company Average charged guaranty fee on newly acquired single-family conventional loans, net of TCCA fees, increased to 54.3 basis points for Q3, compared with 52.2 basis points for Q2.
• Single-family serious delinquency rate decreased to 0.54% as of September 30, 2023, from 0.55% as of June 30, 2023. Single-family seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process.