Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Federal National Mortgage Association Fannie Mae (FNMA, Financial) reported a net income of $4.5 billion in the second quarter, an increase from $4.3 billion in the first quarter.
- The company's net worth reached $86.5 billion, indicating strengthened financial stability.
- FNMA provided $95 billion of liquidity to the single-family and multifamily markets, assisting 330,000 households in buying, refinancing, or renting a home.
- The credit profile of FNMA's single-family acquisitions remained healthy, with a weighted average original loan-to-value ratio of 78% and a weighted average credit score of 759.
- FNMA continues to innovate by issuing over $5 billion in single-family social bonds and over $4 billion in multifamily social bonds, supporting affordable housing and underserved markets.
Negative Points
- Affordability concerns and low inventory of homes for sale are limiting the number of buyers willing and able to purchase a home.
- The multifamily market is experiencing a decline in property values, with a nearly 20% drop from the peak in July 2022 to June 2024.
- FNMA's multifamily acquisitions decreased, reflecting low overall market volumes and increased competition.
- The multifamily serious delinquency rate is expected to increase due to a portfolio of adjustable-rate conventional loans anticipated to become seriously delinquent.
- The economic outlook remains uncertain, with expectations of continued high interest rates and subdued multifamily sales activity in the near term.
Q & A Highlights
Q: Can you provide more details on the economic environment and its impact on Fannie Mae's operations?
A: Priscilla Almodovar, President and CEO, explained that while inflation slowed in the second quarter, the interest rate environment remained high, affecting affordability. The 30-year fixed mortgage rate averaged 7%, and home prices increased by 3% during the quarter. Affordability concerns and low inventory limited home buying, with only 19% of consumers believing it's a good time to buy a home. Rent growth also posed challenges, with a 100 basis point increase in the second quarter.
Q: What were the key financial results for Fannie Mae in the second quarter of 2024?
A: Chryssa Halley, CFO, reported a net income of $4.5 billion, up from $4.3 billion in the first quarter. Revenues were strong at $7.3 billion, driven by guarantee fee income. The company saw a $300 million benefit for credit losses, primarily due to a release in single-family reserves. Fannie Mae's net worth increased to $86.5 billion, enhancing financial stability.
Q: How did Fannie Mae perform in the single-family and multifamily markets?
A: In the single-family market, Fannie Mae acquired $86 billion in loans, a 38% increase from the previous quarter, with 87% being purchase loans. The credit profile remained healthy with a 78% loan-to-value ratio and a 759 credit score. In the multifamily market, $9 billion in loans were acquired, with a decline in property values by nearly 20% since July 2022. The multifamily serious delinquency rate was stable at 44 basis points.
Q: What are Fannie Mae's expectations for the housing market and economic outlook?
A: The company expects two Federal Reserve rate cuts later in the year but does not foresee a significant increase in housing activity without income growth, slower home price appreciation, or lower mortgage rates. Home prices are projected to rise 6.1% in 2024, with single-family mortgage originations growing to $1.7 trillion. Multifamily market origination volumes are expected to be between $245 billion and $315 billion.
Q: How is Fannie Mae addressing affordability and supporting the housing market?
A: Fannie Mae provided $95 billion in liquidity to the single-family and multifamily markets, aiding 330,000 households. The company issued over $5 billion in single-family social bonds and over $4 billion in multifamily social bonds to support affordable housing. They continue to innovate to reduce obstacles like limited credit history and high upfront costs, aiming to make the mortgage process clearer and more accessible.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
