First quarter results reflect growth across its single-family and multifamily businesses
While most of the mortgage industry struggled in Q1, Fannie Mae more than doubled its net income thanks to lower credit loss provisions.
The firm logged a $3.77 billion net income in the first quarter this year, a 165% quarter-over-quarter rise from the previous quarter. The sequential increase was despite net revenues declining 4% to $6.85 billion over the same period, mainly due to a decrease in amortization income.
"As a result, we were able to continue to build our net worth through retained earnings which increased to $64 billion as of the end of March," Fannie Mae CEO Priscilla Almodovar said in the company's earnings call with reporters. "While our quarterly mortgage acquisition volumes were the lowest they've been since 2000, we still provided $78 billion in liquidity to the single-family and multifamily markets."
Fannie Mae's provision for credit losses in Q1 was $132 million, significantly lower than the $3.28 billion recorded in Q4 2022. That $3.15 billion decrease in expenses more than accounted for the company's income surge.
Almodovar attributed the strong results to how well they have been able to manage risks. "For example, we actively monitor counterparty risk across our many partners, including small and midsized banks and nonbanks as they respond to the current economic and regulatory environment," she explained. "We expand access to credit responsibly for the borrowers we serve and for our financial resilience. We actively monitor the credit quality of our existing mortgage book, which today remains sound, and lastly, because of our ability to retain earnings, we maintain significant liquidity."
"The provision for credit losses for the first quarter of this year was driven by a multifamily provision, partially offset by a modest single-family credit benefit," added Chryssa Halley, chief financial officer of Fannie Mae. "The multifamily provision was primarily due to declines in property values and continued uncertainty related to the seniors housing loans, including uncertainty related to adjustable rate loans. The single-family credit benefit was primarily driven by improvements in actual and forecasted home prices, substantially offset by a provision on newly acquired loans."
Single-family net income jumped 112% to $3.13 billion for the first quarter. Fannie's multifamily business also posted a huge gain, bouncing back from a loss of $52 million in Q4 to a profit of $640 million in Q1.
"We delivered strong first-quarter results in a volatile market and remain committed to being a source of stability for the housing finance system throughout all economic cycles," said Almodovar. "We are able to do so because of the changes we've made to improve the resilience of our business, our focus on risk management, and strong liquidity. This allows us to continue to facilitate affordable, equitable, and sustainable access to homeownership and rental housing."
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