Mortgage

Fannie Mae's 2020 earnings are down on account of COVID-related borrowing prices

Fannie Mae's net income declined, but related quarter earnings rose from the spring due to low interest rates and the resulting boom in refinancing activity.

The government-sponsored company posted net income of $ 4.6 billion in the fourth quarter, up from $ 4.2 billion in the third quarter and $ 4.4 billion last year. The government-sponsored company posted net income of $ 11.8 billion in 2020, down from $ 14.2 billion in 2019 and $ 16 billion in 2018.

The annual decrease was mainly due to nearly $ 900 million in credit-related expenses incurred as a result of the pandemic, compared to $ 3.5 billion in credit-related income in 2019, said Celeste Mellet Brown, chief financial officer from Fannie, in the winning call.

Fannie's fourth quarter and net income for the year exceeded Freddie Mac's net income of $ 2.9 billion and $ 7.3 billion, respectively.

"Today's Fannie Mae is far tougher than yesterday's Fannie Mae," said Hugh Frater, Fannie's chief executive officer, on his earnings call. "In 2020, with the biggest labor market disruption since the Great Depression, we brought historic amounts of liquidity to the mortgage market and indulged more than 1.3 million homeowners to keep them in their homes."

With mortgage rates hitting new lows in September and again in December, Fannie funded 1.5 million home purchases in 2020, up 20% from 2019. GSE also refinanced 3.4 million loans, up 200% from 2019 Previous year.

Fannie provided record single-family mortgage liquidity of $ 1.4 trillion in 2020. Refinancing activity was $ 948 billion – the highest amount since 2003. The total was a 135% increase over 2019. The single-family company posted quarterly net income of $ 3.9 billion – up from nearly US 3.8 billion Dollars in the third quarter. It raised $ 9.9 billion for the year, up from $ 11.8 billion in 2019.

The multi-family segment achieved a record $ 76 billion per year. The company posted net income of $ 626 million – up from $ 460 million in the third quarter – and over $ 1.9 billion in 2020 – up from $ 2.3 billion a year earlier.

The GSEs began modifying their preferred stock purchase agreements by the Treasury Department and the Federal Housing Finance Agency in 2021 to hold more capital. This is another step towards a responsible exit from the conservatory. The agreement was largely supported by the mortgage industry.

The change allows Fannie to raise funds until it is "adequately capitalized under the new corporate framework," Brown said. "This is essential as it remains an essential unfinished aspect of our transformation from a conservation perspective."

Fannie specifically reintroduced hedge accounting to reduce the volatility of earnings. The first effects of this assumption will be seen in the first quarter of 2021.

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