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GSEs Report Multi-Billion Dollar Q3 Earnings

The government-sponsored enterprises (GSEs) recorded increases in their respective comprehensive and net income levels in their newly released third quarter earnings reports.

Fannie Mae posted a net income of $4.2 billion in the third quarter, up from $2.5 billion in the second quarter and higher than the $3.9 billion during the third quarter of 2019. It also reported $4.2 billion in comprehensive income, up from $2.5 billion in the previous quarter and $3.9 billion one year earlier.

Fannie Mae reported its single-family acquisition volume was $391.4 billion in the third quarter, an 11% increase from the second quarter that was primarily fueled by a $7 billion increase in refinance volume that resulted in the highest level of refinance volumes in any quarter since the third quarter of 2003. However, Fannie Mae’s single-family serious delinquency rate increased to 3.20% from the second quarter’s 2.65% due to the large number of loans in COVID-19-related forbearances becoming seriously delinquent. The single-family serious delinquency rate excluding loans in forbearance was 0.65%, slightly above the second quarter’s 0.59%.

On the multifamily side, the guaranty book of business totaled $367 billion, up by $9 billion from the previous quarter, while the multifamily serious delinquency rate increased to 1.12% from the second quarter’s 1%. The multifamily serious delinquency rate excluding loans in forbearance was 0.04% as of Sept. 30.

“Our performance this year demonstrates our ability to support the mortgage market in a safe and sound manner even during these uniquely challenging times, said CEO Hugh R. Frater. “To continue meeting these challenges, we believe our company and the broader housing finance system would be best served by a responsible end to Fannie Mae’s conservatorship, consistent with FHFA’s goals.”

Separately, Freddie Mac announced $2.5 billion in third quarter net income, up from $1.77 billion in the second quarter and up from $1.70 billion in the third quarter of 2019. It also reported $2.4 billion in comprehensive income, up from $1.9 billion in the previous quarter and up from $1.8 billion one year earlier.

During the second quarter, Freddie Mac reported $337 billion in new single-family business activity, a 45% increase from the previous quarter. However, its new multifamily business activity declined to $18 billion, down 10% from the prior quarter. On a year-over-year measurement, Freddie Mac’s single-family and multifamily guarantee portfolios grew 11% and 14%, respectively.

The third quarter serious delinquency rate for single-family increased to 3.04% from 2.48% in the prior quarter, due primarily to loans that were in forbearance due to the COVID-19 pandemic; 2.95% of loans in the single-family guarantee portfolio were delinquent and in forbearance by the end of the third quarter. The multifamily delinquency rate, which does not include loans in forbearance, inched up to 0.13%.

“The company delivered strong earnings on higher revenues, substantially increasing our total equity by $2.5 billion to $13.9 billion—bringing us one step closer to our goal of responsibly exiting conservatorship,” said CEO David M. Brickman. “We did this while helping hundreds of thousands of families buy, rent, and remain in their homes.”

About Author: Phil Hall

Phil Hall is a former United Nations-based reporter for Fairchild Broadcast News, the author of nine books, the host of the award-winning SoundCloud podcast "The Online Movie Show," co-host of the award-winning WAPJ-FM talk show "Nutmeg Chatter" and a writer with credits in The New York Times, New York Daily News, Hartford Courant, Wired, The Hill's Congress Blog and Profit Confidential. His real estate finance writing has been published in the ABA Banking Journal, Secondary Marketing Executive, Servicing Management, MortgageOrb, Progress in Lending, National Mortgage Professional, Mortgage Professional America, Canadian Mortgage Professional, Mortgage Professional News, Mortgage Broker News and HousingWire.
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