Federal National Mortgage Association Fannie Mae (FNMA) Q3 2024 Earnings Call Highlights: ...

GuruFocus News
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Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Federal National Mortgage Association Fannie Mae (FNMA) reported a net income of $4 billion for the third quarter, contributing to a net worth increase to $90.5 billion.

  • The company provided $106 billion of liquidity to the single-family and multifamily markets, assisting 383,000 households in buying, refinancing, or renting homes.

  • FNMA's efforts included supporting 103,000 units of multifamily rental housing, primarily affordable for households earning at or below 120% of area median income.

  • The company is actively working to remove obstacles for renters and homebuyers, such as limited credit history and high upfront costs, by using rent payment data to support better outcomes.

  • FNMA is exploring new ways to support its mission in the capital markets, including single-family and multifamily social bonds aimed at affordable housing and underserved markets.

Negative Points

  • Net income for the third quarter decreased by $440 million compared to the second quarter.

  • The benefit for credit losses was down by $273 million, with a $424 million provision for credit losses in the multifamily sector.

  • Multifamily property values have declined by 19.5% from their peak in the second quarter of 2022, returning to 2021 levels.

  • The single-family serious delinquency rate increased to 52 basis points, with expectations of further increases due to economic conditions and natural disasters.

  • Multifamily serious delinquency rate rose to 56 basis points, driven by a portfolio of arm loans that became seriously delinquent.

Q & A Highlights

Q: Can you provide more details on the decline in net income for the third quarter compared to the second quarter? A: Chryssa C. Halley, Executive Vice President and CFO, explained that the net income for the third quarter was $4 billion, down from $4.5 billion in the second quarter. This decline was primarily due to a decrease in the benefit for credit losses and a provision for credit losses in the multifamily sector, driven by arm loans and modest decreases in forecasted property values.

Q: What are the current trends in the housing market, and how do they affect Fannie Mae's operations? A: Priscilla Almodovar, President and CEO, noted that despite lower mortgage rates, existing home sales remain low due to housing affordability issues. Home prices have increased by 5.9% since the start of the year, impacting affordability. Fannie Mae is focusing on providing liquidity and supporting affordable housing through various initiatives, including social bonds and rent payment data utilization.

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