Fannie and Freddie Report 2020 Financial Results
Written By: Joel Palmer, Op-Ed Writer
Freddie Mac and Fannie Mae released strong fourth quarter and full-year financial reports for 2020.
Fannie said provided $1.4 trillion in liquidity in 2020, its highest on record. Freddie’s new business activity totaled $1.183 trillion, an increase of 141 percent from the year before.
"In 2020, Freddie Mac continued to serve the important role for which it was founded: supporting the housing market in all economic conditions,” said Christian M. Lown, chief financial officer of Freddie Mac. “In the face of extraordinary economic uncertainty caused by COVID-19, we provided record liquidity, enabling millions of borrowers to purchase or refinance homes at historically low interest rates.”
“Much has been written about the causes of the last financial crisis in 2008 and the roles of the various actors, including the GSEs. But there is little debate about the positive role we are playing in today's COVID crisis. That's because today’s Fannie Mae is very different and far more resilient than the Fannie Mae of yesterday,” said Fannie Mae CEO Hugh R. Frater.
“And, in 2020, with the greatest labor market disruption since the Great Depression, we provided historic amounts of liquidity to the mortgage market and we provided forbearance to more than one million homeowners to help keep them in their homes.”
Freddie booked net income of $7.3 billion for the full year, an increase of 1.5 percent from the previous year. Fannie, on the other hand, experienced a 16.6 percent decrease in net income between 2019 and 2020. Its 2020 net income was $11.8 billion.
Fannie said the decline in year-over-year net income was due to a shift in credit-related income that totaled $3.5 billion in 2019, but only $900 million in 2020 as a result of the pandemic.
Freddie said its credit-related expense increased to $2.3 billion from $0.2 billion in the prior year. Its benefit for credit losses shifted to a provision for full-year 2020 due to portfolio growth and higher expected credit losses as a result of the COVID-19 pandemic, which were partially offset by growth in realized and forecasted house prices during 2020 and a higher benefit for credit enhancement recoveries.
Fannie’s full year net revenues increased 16 percent to $25.3 billion. The company said this was due to record acquisition volumes, which drove higher remitted guaranty fee income and accelerated net amortization income.
Freddie reported full-year net revenues of $16.7 billion, an increase of 18 percent from 2019. The company said much of its revenue growth was due to a 122 percent increase in investment gains driven by higher margins on multifamily loan commitments.
Fannie said 1.3 million single-family loans, about 7.7 percent of its book, have entered forbearance since the start of the pandemic. By the end of the year, 60 percent of those loans had exited forbearance, leaving 3 percent of its book in active forbearance. In addition, more than 60 percent of the multifamily loans that had entered forbearance has exited.
Freddie reported that 2.70 percent of its single-family loans and 2.01 percent of its multifamily loans were in forbearance as of December 31, 2020.
For the quarter, Freddie reported net income of $2.9 billion, an increase of 18 percent compared to $2.5 billion for the third quarter of 2020. Net revenues were $5.0 billion, unchanged from the previous quarter.
Fannie reported net revenue of $7.2 billion for the fourth quarter, up 7 percent from the third quarter. Fourth-quarter net income was $4.6 billion, up 8 percent.
Both enterprises built considerably more equity in 2020. Freddie grew its net worth from $9.1 billion in 2019 to $16.4 billion at the end of 2020. Fannie’s net worth increased from $14.6 billion to $25.3 billion.
On January 14, 2021, the Federal Housing Finance Agency entered into an agreement with the U.S. Treasury that allows the GSEs to continue to build capital by retaining earnings until it meets certain requirements in the Enterprise Regulatory Capital Framework.
“I firmly believe that a responsible exit from conservatorship and a recapitalization of Fannie Mae is the best way to support our mission to serve America's housing needs for future generations, while protecting the taxpayer and creating a substantial layer of loss-absorbing capital,” said Frater.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
