Both Fannie Mae and
Freddie Mac (the GSEs) reported strong financial results in the fourth quarter of
2020 and significant growth in their net worth which, for the first time in
their 12 years in conservatorship, they have an unlimited capacity to grow.
Fannie Mae’s net and comprehensive income was $4.6 billion in the
fourth quarter and $11.8 billion for the entire year. The quarterly net and
comprehensive incomes were both about $300 million higher than in Q3, but the
full year fell well short of the 2019 total net of $14.2 billion and
comprehensive of $14 billion.
Revenues were higher at $6.3 billion for the quarter and $21.9
billion for the year. The net revenues for the two earlier periods were $5.9
billion and $18.5 billion, respectively. The company said the decline in net
and comprehensive income for the year despite the higher revenues was due to a
significant decline in credit-related income, from income of $3.5 billion in
2019 to a loss of $(232) million in 2020.
The company acquired $1.4 trillion in mortgages during the year,
up 135 percent from 2019 and the largest volume in its history. The total
represented a $664 billion increase in refinancing. Thirty-eight percent of the
company’s single-family conventional guaranty book of business at the end of
2020 was originated during that year.
At year end 3.0 percent (524,555) of the loans in that guaranty
portfolio was in forbearance, down from 4.1 percent at the end of Q3. However,
12 percent of those forborne loans were still current.
Fannie Mae reported its
net worth at the end of 2020 was $25.3 billion, a year-over-year gain of $10.7
billion. Under the terms of its agreement with the U.S. Treasury, when that net
reached a $25 billion “buffer” the company had to resume net sweep dividend
payments of any excess to Treasury. That agreement was modified last month to
allow both GSEs to begin building capital which would allow them to fund their
exit from conservatorship.
Freddie Mac reported net
income for the fourth quarter of $2.9 billion and $7.3 billion for the entire
year. Comprehensive income for the two periods was $2.5 billion and $7.5
billion. The year-end totals were $0.1 billion higher for net income and $0.3
billion lower for comprehensive income than in 2019. Comprehensive income was
down because of higher provisions for credit losses.
Interest income for the
full year was $900 million higher than a year earlier at $12.7 billion and the
quarterly share, at $3.7 billion beat the previous quarter by almost $200
million. The company attributed this to portfolio growth and faster mortgage
prepayments due to low interest rates. Guarantee fee income totaled $1.4 billion compared to $1.1 billion in 2019
and investment gains were almost $1 billion higher.
Freddie Mac said its new
business activity increased 141 percent from 2019 to $1.1 trillion, driven by
both purchase and refinance activity which grew because of the low interest
rate environment. The company funded 3.8 million single-family homes,
approximately 27 percent of them through refinancing. The weighted average
loan-to-value ratio of new activity improved from 77 percent in 2019 to 71
percent in 2020.
The company’s Single-Family
guarantee portfolio grew 17 percent to $2.3 trillion. This came through an
increase in single-family mortgage debt outstanding and higher new business
The total net worth of
Freddie Mac grew to $16.4 billion from $9.1 billion at the end of 2019. As with
Fannie Mae, Freddie Mac will no longer have a limit to its net worth after
which it must resume dividends to the Treasury but instead those dividends are
deferred and increase the value of Treasury’s preferred stock holdings. That
value increased from $84.1 billion on September 30, 2020 to $86.5 billion at year’s