Fannie Mae, Freddie Mac shares tumble after conservatorship comments
Fannie Mae (OTC:FNMA), with a market capitalization of $38.6 billion, reported its fourth-quarter 2024 earnings, revealing a net income of $17 billion, a decrease of $430 million compared to the previous year. The company's net revenues stood at $29 billion. Despite a slight dip in earnings, Fannie Mae maintained its positive earnings streak for the 28th consecutive quarter. The stock has shown remarkable momentum, delivering a 511% return over the past six months. According to InvestingPro analysis, the stock appears to be trading above its Fair Value, with shares currently at $66.
Key Takeaways
- Fannie Mae reported a net income of $17 billion for 2024, down $430 million from 2023.
- The company maintained a strong net worth, reaching nearly $95 billion.
- Single-family loan acquisitions increased by 3% from 2023.
- Multifamily loan acquisitions rose by 4% from 2023.
- Stock price increased by 1.82% following the earnings announcement.
Company Performance
In 2024, Fannie Mae continued to demonstrate resilience in a challenging housing market. The company achieved a net income of $17 billion, slightly lower than the previous year, but managed to grow its net worth to nearly $95 billion. InvestingPro data shows the company maintains a "GOOD" overall financial health score, with particularly strong price momentum metrics. The company has built $37 billion in regulatory capital over the past two years, underscoring its financial stability. Revenue growth reached 8.92% in the last twelve months, while Fannie Mae's single-family and multifamily loan acquisitions also saw modest growth, reflecting ongoing demand in the housing market.
Financial Highlights
- Net income: $17 billion (down $430 million from 2023)
- Net revenues: $29 billion
- Guarantee fee income: $23 billion
- Non-interest expenses: $9.8 billion (flat year-over-year)
- Credit loss benefit: $186 million
Outlook & Guidance
Looking ahead, Fannie Mae expects mortgage rates to remain above 6% and projects existing home sales to reach 4.15 million units in 2025. The company anticipates home prices to grow by 3.5% in the same year. Additionally, single-family mortgage originations are forecasted to reach $1.9 trillion, while multifamily market originations are expected to range between $330 billion and $375 billion. Rent growth is projected at 2-2.5%. Notably, InvestingPro reveals that analysts anticipate sales growth in the current year, though profitability remains a concern. Get access to 6 additional exclusive ProTips and comprehensive analysis with an InvestingPro subscription.
Executive Commentary
CEO Priscilla Almodovar highlighted the company's commitment to its mission, stating, "We continue to deliver strong earnings while carrying out our mission." She also acknowledged the ongoing challenges in housing affordability. CFO Krista C. Halley emphasized the supportive demographic trends for multifamily construction, saying, "Longer-term demographic trends remain supportive of multifamily construction."
Risks and Challenges
- Housing affordability remains a significant challenge, impacting demand.
- Fluctuating mortgage rates could affect homebuyer activity.
- Economic uncertainties may pose risks to the broader housing market.
- Regulatory changes could impact operational strategies.
- Competitive pressures in the lending market may affect market share.
The earnings call highlighted Fannie Mae's robust financial performance and strategic resilience, even as the company navigates a challenging housing market landscape.
Full transcript - Ferronordic Machines AB (ST:FNMA) Q4 2024:
Conference Operator: Good day, and welcome to the Fannie Mae Fourth Quarter and Full Year twenty twenty four Financial Results Conference Call. At this time, I will now turn it over to your host, Pete Bickell, Fannie Mae's Director of External Communications.
Pete Bickell, Director of External Communications, Fannie Mae: Hello, and thank you all for joining today's conference call to discuss Fannie Mae's fourth quarter and full year twenty twenty four financial results. Please note this call includes forward looking statements, including statements about Fannie Mae's expectations related to economic and housing market conditions, the future performance of the company's book of business and the company's business plans and their impact. Future events may turn out to be very different from these statements. The Risk Factors and Forward Looking Statements sections in the company's 2024 Form 10 ks filed today describe factors that may lead to different results. A recording of this call may be posted on the company's website.
We ask that you do not record this call for public broadcast and that you do not publish any full transcript. I'd now like to turn the call over to Fannie Mae President and Chief Executive Officer, Priscilla Almodovar and Fannie Mae Chief Financial Officer, Krista C. Halley.
Priscilla Almodovar, President and Chief Executive Officer, Fannie Mae: Welcome and thank you for joining us. I'll begin by summarizing economic conditions in 2024 before moving on to our financial results and mission impact. After that, our Chief Financial Officer, Chrissa Haley will discuss our results in more detail. First, the economy. In 2024, consumer spending was steady.
Unemployment remains low and job growth was healthy. Inflation, however, remained stubborn, particularly in housing. The thirty year mortgage rate averaged 6.7% during the year, slightly lower than 2023, but much higher than the historically low mortgage rates borrowers could get just a few years ago. These low mortgage rates led to the lock in effect, meaning many homeowners act tight in their homes and fewer homes were available for sale. In fact, existing home sales in 2024 were near thirty year lows.
While the inventory of overall homes increased in some areas, nationally, supply did not keep pace with demand. As a result, single family home prices in 2024 grew by an estimated 5.8% compared to 5.5% in 2023. Given these factors, housing affordability remains a real challenge. According to our most recent Home Purchase Sentiment Index, just over one in five consumers believe it is a good time to buy a home. In the overall mortgage market, single family originations increased to an estimated $1,700,000,000,000 from $1,500,000,000,000 in 2023.
Multifamily mortgage market originations were an estimated $295,000,000,000 in 2024, up from $246,000,000,000 in 2023. While multifamily supply increased nationally, in some areas it continued to be constrained. The new supply that did come online was absorbed with multifamily vacancy rates holding steady at 6% compared to year end 2023. Rents grew only an estimated 1% for the year and property values continued to decline, but at a slower pace than the prior year. Now let's turn to our financial results.
We earned $17,000,000,000 in net income in 2024 compared to $17,400,000,000 in 2023. Our fourth quarter net income was $4,100,000,000 marking our twenty eighth quarter of consecutive positive earnings. Our revenues continue to be driven by Guarantee Fee income. This is consistent with the change we made to our business model well over a decade ago to move to a guarantee driven business while repurposing and reducing our retained mortgage portfolio. As of the end of the year, we grew our net worth to nearly $95,000,000,000 further increasing our financial stability.
And over the past two years, we have built nearly $37,000,000,000 of regulatory capital. We delivered strong financial results while staying focused on our mission. In 2024, Fannie Mae provided $381,000,000,000 of liquidity to the single family and multifamily markets. This essential work helped approximately 1,400,000 households buy, refinance or rent to home. This helped three hundred and ninety one thousand first time homebuyers to buy a home.
It also included about 420,000 units of multifamily rental housing, most of which are affordable for households earning at or below 120% of area median income. As I mentioned earlier, housing affordability is tough for many consumers. By our estimate from 2010 to 2023, medium home prices rose about 102%, but incomes only rose about 64%. While Fannie Mae does not control many of the factors impacting affordability, we are committed to working with our partners in housing to tackle this challenge. For instance, we continued our work to reduce key obstacles that many consumers face, such as limited credit history and high upfront costs.
This includes innovative ideas that fit within our existing credit eligibility guidelines. We're creatively using our role in the capital markets to support our mission through our single family mission index disclosures, which helped interested mortgage backed security investors allocate their capital in support of affordable housing. Further, we continue to offer a full suite of loss mitigation options to support homeowners facing hardship. We believe these actions make the housing finance system and our book of business stronger. 2024 was another year of progress for Fannie Mae.
We continue to deliver strong earnings while carrying out our mission and being a reliable source of liquidity for the nation's housing market. As we head into 2025, we remain focused on our strength, adapting to and meeting the needs of the market and serving America's homeowners and renters safely and soundly. We're able to play our essential role in housing, thanks to the good work of our team over many years to transform our business model, enhance how we manage risks and strengthen our finances. Now I'll turn it to Krista to share more about our 2024 annual and fourth quarter results.
Krista C. Halley, Chief Financial Officer, Fannie Mae: Thank you, Priscilla, and good morning. As Priscilla mentioned, we reported $17,000,000,000 of net income in 2024, down $430,000,000 from 2023. Net revenues remained strong at $29,000,000,000 thanks to healthy guarantee fee income of $23,000,000,000 Non interest expenses were $9,800,000,000 relatively flat to 2023. We recorded a $186,000,000 benefit for credit losses in 2024. This lower benefit compared to 2023 was the primary driver of our decrease in net income.
The single family benefit for credit losses was $938,000,000 due mainly to a continuation of longer term improvements in our home price forecast. The multifamily provision increased by $257,000,000 to $752,000,000 because of an incremental decline in property values, rising delinquencies and the ongoing investigation of lending transactions with suspected fraud. We expect multifamily property values to stabilize in 2025 as I will discuss more in a moment. Turning to the fourth quarter, we reported $4,100,000,000 of net income compared to $4,000,000,000 in the third quarter. This was primarily due to an increase in fair value gains partially offset by a shift to provision for credit losses.
Our single family provision for credit losses in the fourth quarter was mostly driven by higher interest rates relative to the prior quarter. This was slightly offset by a multi family benefit mainly due to improved projections for net operating income and property values. Now let me turn to our segments. Starting with single family, we reported $14,400,000,000 in net income in 2024, a decrease of $425,000,000 compared to 2023. Net interest income was relatively flat year over year, while we saw higher base guarantee fee income, deferred guarantee fee income continued to be muted.
The over year change in our single family net income was primarily driven by the lower benefit for credit losses mentioned in our overall results. We acquired $326,000,000,000 in single family loans last year, a 3% increase compared to 2023 due to slightly higher refinancing activity. The credit profile of our overall single family book remains strong as of year end with a weighted average mark to market loan to value ratio of 50% and a weighted average credit score at origination of seven fifty three. Our strong underwriting and servicing standards help to keep our single family serious delinquency or SDQ rate near historically low levels at 56 basis points at the December. This is compared to 55 basis points at the end of twenty twenty three and '50 '2 basis points at the end of the third quarter.
These increases were driven by increased delinquencies in areas affected by hurricanes. In single family credit risk transfer, we executed several transactions last year, transferring a portion of the credit risk on approximately $186,000,000,000 of unpaid principal balance at the time of the transactions. We paid approximately $1,500,000,000 in premiums during the year on our outstanding single family credit risk transfers. Through primary mortgage insurance and programs such as CAS and CERT, at the end of the year, 46 of our single family book had some form of credit enhancement. Turning to multifamily, we reported $2,500,000,000 in net income in 2024, consistent with 2023.
Compared to 2023, we reported a $74,000,000 increase in net interest income due mainly to higher guarantee fee income from book growth, partially offset by lower average charged guarantee fees and the impact of lower yield maintenance income from fewer prepayments. However, our provision for credit losses increased $257,000,000 year over year as mentioned in our overall results. According to the most recent data from the MSCI RCA Commercial Property Price Index, property values declined 19% from the peak in the second quarter of twenty twenty two to the fourth quarter of twenty twenty four. However, the pace of decline has been slowing throughout 2024 and continued to slow in the fourth quarter. While we expect property values to stabilize in 2025, our multifamily allowance reflects some uncertainty for property value projections.
Our multifamily SDQ rate increased to 57 basis points at the end of twenty twenty four compared to 46 basis points at the end of twenty twenty three. The year over year increase was primarily due to a portfolio of approximately $600,000,000 of ARM loans that became seriously delinquent during the third quarter of the year. Multifamily lending transactions involving fraud or suspected fraud further heightened the risk of default and added to our multifamily credit loss provision. The higher provision year over year was partially offset by a $211,000,000 increase in expected credit enhancement recoveries mainly due to the loss sharing arrangements we have with our DUS lenders. We acquired approximately $55,000,000,000 in multifamily loans last year, up 4% from 2023, reflecting increased market activity in the fourth quarter.
Our overall multifamily book as of year end had a weighted average original loan to value ratio of 63% and a weighted average debt service coverage ratio of two times. In multifamily credit risk transfer, we executed three transactions, transferring a portion of the credit risk on approximately $26,000,000,000 of unpaid principal balance at the time of the transactions. Because of our unique desk risk sharing model, whereby we share a portion of the credit risk on the multifamily loans we acquire, coupled with our MCAS and MCIRT programs, essentially all of our multifamily book has some form of credit enhancement. Turning to capital, as Priscilla mentioned, we have nearly $95,000,000,000 of net worth and over the past two years we have built $37,000,000,000 of regulatory capital meaningfully reducing our regulatory capital deficit. We remain focused on building capital and continuing our progress towards meeting our capital requirements.
We have a $146,000,000,000 capital shortfall to our minimum total risk based capital requirement today, primarily because of the $120,800,000,000 stated value of the senior preferred stock does not qualify as regulatory capital. More information about our capital role and progress towards our regulatory capital requirements are in our financial supplement and 10 ks filed today. Lastly, I'll share our current economic outlook. Given inflation measures have remained stickier than markets expected earlier last year, our economists do not expect a meaningful decline in the ten year treasury rate in 2025. As a result, mortgage rates are expected to remain elevated at above 6% and we predict home sales will remain suppressed.
Existing home sales are expected to total 4,150,000 units in 2025, an improvement over the approximately 4,000,000 units in existing home sales in 2024, but still down more than 20 compared to 2019. We anticipate new home sales will remain strong in 2025, expecting an annualized sales pace of 738,000 units as builders seek to respond to housing demand. While the continued lack of inventory for homes available for sale has helped to keep home price growth strong, we expect home price growth to decelerate in 2025. We currently project year over year home price growth will be 3.5% in 2025 as measured by the Fannie Mae Home Price Index compared to 5.8 in 2024. We anticipate home price growth in 2025 will be slower than the rate of household income growth, helping to gradually improve affordability for homebuyers.
We forecast single family mortgage originations of about $1,900,000,000,000 in 2025, up from an estimated $1,700,000,000,000 in 2024, with purchases forecasted to make up 74% of single family mortgage originations this year. Longer term demographic trends remain supportive of multifamily construction over the next decade as the prime renter aged population is expected to continue to grow. We expect rent growth to be in the 2% to 2.5% range in 2025 and vacancy rates to be between 66.25%. And we forecast multifamily market originations between $330,000,000,000 and $375,000,000,000 in 2025. Our expectations are based on many assumptions and our actual results could differ materially from our current expectations.
I invite you to visit fanniemae.com where you'll find our financial supplement and our twenty twenty four ten ks filed today that provides additional insights into our business. Thank you for joining us today.
Conference Operator: Thank you, everyone. That concludes today's call. You may disconnect.
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