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Mortgage giants Fanny Mae and Freddie Mac continue to build their net worth on strong income and profits in line with the Trump administration’s desire to release businesses from government guardians.
But incoming Treasury Secretary Scott Bescent said the Trump administration has other priorities for now, and plans to privatize Fanny and Freddie should bring consumers to boost mortgage rates. He said that was not the case.
In the meantime, some housing finance experts have warned that the Trump administration may impose restrictions on how much support the mortgage giant can provide to more risky borrowers.
Fannie and Freddie were placed in government sanctuaries in 2008 as mortgage delinquency and foreclosure rose during the Great Recession of 2007 and 2009.
The mortgage giant has come a long way since then, but this week it combined $28.9 billion in 2024 profits to increase its total net worth to over $150 billion.
Fannie May revealed in it Annual Report For investors on Friday, credit loss provisions increased by $257 million this year, and could affect the performance of guaranteed multi-family loans due to suspected fraud or fraud, resulting in 752 million. It increased to dollars.
However, Bucking Fanny stipulates apartment buildings that account for just a small portion (16%) of the company’s 2024 revenue, with the multi-family business being profitable and net worth $2.5 billion. It’s generating profits.
Most of Fannie Mae’s $17 billion (85%) of 2024 profit came from the detached home mortgage guarantee business, which supported $326 billion in mortgage last year. This includes 778,000 purchase loans totaling $270 billion and 204,000 refinances totaling $56 billion.
Priscilla Almodovar
“In 2024, we increased our net worth to almost $95 billion, continued to build regulatory capital and implemented our mission,” said Priscilla Almodovar, CEO of Fannie May. statement. “Our strong results were driven by guaranteed fee revenues, consistent with the business model transformation that began more than a decade ago.”
This story was much the same with Freddie Mac, but in the past, investors have warned of potentially fraudulent loans in multi-family businesses.
Freddie Mac’s Lion Share (79%) 2024 profits of $11.9 billion I came from a detached house business. Fannie Mae has traditionally been a big business, but Freddie Mac surpassed his rival in 2024, which supports a $346 billion mortgage.
Freddie Mac leads the volume of mortgages purchased
sauce: Fanny May and Freddie Mac Revenue Report.
Rather than making a loan for themselves, Fannie and Freddie package the standard mortgage into mortgage-backed securities (MB) sold to investors.
The MB, backed by Fannie and Freddie, is considered a safe investment by investors as the mortgage giant ensures that investors are still paying, even if the homeowner stops paying.
Jim Whitlinger
“Last year alone, Freddie Mac has acquired more than 1 million loans from over 1,000 lenders of all sizes across the country,” said Jim Whitlinger, Freddie Mac’s chief financial officer, with investment analysts. I said this over the phone. “We packaged these loans into mortgage-backed securities, or MBs, that attracted investors around the world to support housing in the US.”
Last year, Freddie Mac purchased loans in cash, and issued a total of over $41.1 billion in MBS, an increase of 18% from 2023.
Mortgage Giants’ total net worth reaches $154.3 billion
sauce: Fanny May and Freddie Mac Revenue Report.
Since paying back $191 billion in taxpayer relief, Fannie and Freddie have been gradually building their net worth with the first Trump administration decision to allow both companies to maintain all their revenues.
Fannie Mae’s net worth increased 22% in 2024 to $94.7 billion, while Freddie Mac strengthened his net worth by 25% to $59.6 billion.
Federal Housing Finance Agency, federal regulator for Fannie and Freddie, estimates that the mortgage giant needs a total of $319 billion in adjusted total capital.
According to FHFA, Fannie and Freddie’s capital status “has improved since 2008, but it is not robust enough to prevent a Treasury draw in the event of a major loss.” Annual Report to Congress June.
President Trump launched a complex and politically challenging process of privatizing the mortgage giant during his first administration, and his allies roll the ball again, even before they win re-election in November It is reportedly been working on this.
Scott Bescent
Last week, Secretary of the Treasury Scott Bescent said Bloomberg’s Saleha Mohsin is set to expire this year on Trump’s 2017 tax cuts, with the debt cap deadline approaching in March, with backburner releasing Fannie and Freddie from government parents.
“The priority now is tax policy,” Bescent said. “Once we get through that, we’ll think about the priorities of Fannie and Freddie’s release.”
Many Democrats and Republicans agree that Fannie and Freddie don’t need to be parents anymore. However, there are quite a few differences as to whether the mortgage market needs to be fully privatized (which could raise interest rates on mortgages) or whether the government should continue to provide some kind of backstop. .
The National Association of Realtors and other real estate industry groups argue that the government continues to play a role in the secondary mortgage market. The NAR suggests that Fannie and Freddie could be replaced by new private organizations that are regulated, like utility works.
Bescent said the most important indicator he sees before releasing Fannie and Freddie from the reserve is “any study or hint that mortgage rates will go up is any study.” Anything that focuses on safe and healthy releases will affect your long-term mortgage rate. ”
Baseline conformance loan limit, 2000-2025
Source: Federal Housing Finance Agency
With rising home prices, Fannie and Freddie can buy bigger mortgages. The adaptive lending limit for single-family homes in most markets is currently at $806,500, and the mortgage giant can now reclaim up to $1.2 million in loans in high-cost markets.
However, Fannie and Freddie are still doing about half of their business with first-time home buyers (below 20% payments) as eligible borrowers can put just 3% when buying a home Buyers who are doing so must take out private mortgage insurance at their own expense.
Freddie Mac helped 426,000 first-time home buyers with mortgages in 2024, while Fannie Mae helped 391,000 renters become homeowners.
“For many consumers, housing affordability is difficult,” Almodovar said in a call with investment analysts. “Estimates from 2010 to 2023 showed median home prices rose about 102%, while revenues rose only about 64%.”
“We don’t control many of the factors that affect affordability, but we are committed to working with housing partners to tackle this challenge,” says Fanny May, who is limited. It stated that it will help consumers face credit history and high upfront costs.
The first Trump administration had planned to limit Fannie and Freddie’s “high-risk” single-family loan purchases to 6% of mortgages and 3% of refinances.
High risk was defined as two of the following three factors: A down payment of less than 10%, debt revenues above 45%, or borrower credit scores below 680.
Share of “high risk” purchase loans supported by Fannie and Freddie
The proposed restrictions on high-risk loans were withdrawn by the Biden administration, and since then the share of the purchase loans backed by Fanny and Freddie in 2023 was defined as risky in 2023 and 2024. It would have been. To the analysis of the Urban Research Institute.
“Many people are hoping that emerging administrations will consider revamping their high-risk, second homes and investor real estate loan caps, but if they do so counterproductively lend, they will be able to see housing. We think it will be more difficult to buy,” says Urban Institute researchers RoleGoverman and John Walsh. I said it in December.
Kreissa Halley
Fannie Mae CFO Chryssa Halley said on Friday that the credit profile of single-family mortgages backed by Fannie Mae is strong, with an average loan-value ratio and an average credit score with an origination of 753.
In a call with investment analysts, Halley admitted that “multi-family lending transactions that include fraud or suspected fraud have further increased the risk of default and added it to the multi-family credit loss provision.”
Fannie May got a $55 billion multi-mortgage loan in 2024, but with the $26 billion of these loans, he transferred some of the credit risk to other companies, saying, “essentially our multi-family.” Everything in the book has strengthened some credits.”
Fannie and Freddie-supported detached home mortgage
sauce: Fanny May and Freddie Mac Revenue Report.
Fannie and Freddie provided $6.72 trillion guarantee on single-family mortgages at the end of 2024. This has remained quite constant since 2022, when mortgage rates increased the pace of home sales and mortgage refinancing slowed.
Together, Fannie and Freddie employ more than 16,000 workers, making up the majority of the Washington, DC Metro area.
As of January 31st, Freddie Mac had 8,076 full-time employees, a slight rise from 8.004 at the same time in 2023. Fannie Mae reported that as of December 2024, there were around 8,200 employees, up from 8,100 in 2023.
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