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GSEs Report Lower Net Income for 2019

Phil Hall
Feb 13, 2020
Photo credit: Getty Images/Gearstd

The government-sponsored enterprises (GSEs) have reported declines in their respective lower annual net income and comprehensive income for 2019. However, both recorded quarter-over-quarter increases in net and comprehensive income levels for the fourth quarter of last year.
 
Fannie Mae reported annual net income of $14.2 billion and annual comprehensive income of $14 billion for 2019, a decline from the $16 billion in net income and $15.6 billion in comprehensive income reported in 2018. The GSE attributed the decrease to a shift in fair value losses fueled by plummeting interest rates throughout last year.
 
Fannie Mae also reported net income of $4.4 billion and comprehensive income of $4.3 billion during the fourth quarter of 2019, up from the $4 billion in net income and $4 billion in comprehensive income in the third quarter.  
 
Fannie Mae also reported that provided more than $650 billion in liquidity to the mortgage market in 2019, financing roughly one in four single-family mortgages. It was also the largest issuer of single-family mortgage-related securities in the secondary market during 2019 with an estimated market share of single-family mortgage-related securities issuances of 37 percent, and its $70 billion in multifamily financing, roughly one-fifth of the multifamily mortgage debt outstanding last year.
 
Fannie Mae’s retained mortgage portfolio decreased to $153.6 billion as of the end of 2019, down from $179.2 billion one year earlier. This decline was attributed to a decrease in its loss mitigation portfolio driven by sales of reperforming loans.
 
“Our results further demonstrate the strength and earnings power of Fannie Mae’s business in 2019, including our ability to manage risk and generate solid returns in both our single-family and multifamily business lines,” said CEO Hugh R. Frater. “We continue to fulfill our mission to provide liquidity to the mortgage market and meet our housing goals, while growing our guaranty fee income and managing expense growth. We begin 2020 with a net worth of $14.6 billion, thanks to strong retained earnings and prudent risk management.”  
 
Freddie Mac reported annual net income of $7.2 billion and annual comprehensive income of $7.7 billion for 2019, a decline from the $9.2 billion in net income and $8.6 billion in comprehensive income reported in 2018. The GSE attributed the year-over-year declines to several factors including lower net interest income on its investments portfolio combined with lower amortization income, which were partially offset by a higher contractual net interest income on the single-family guarantee portfolio and a higher guarantee fee income on the multifamily guarantee portfolio.
 
Freddie Mac also reported net income of $2.5 billion and comprehensive income of $2.4 billion during the fourth quarter of 2019, up from the $1.7 billion in net income and $1.8 billion in comprehensive income in the third quarter.  
 
The GSE added that it provided nearly $558 billion in liquidity to the mortgage market during 2019, serving approximately 950 regional and community-oriented single-family lenders that represented nearly 95 percent of all single-family lenders. First-time homebuyers represented 46 percent of the GSE’s new single-family purchase loans in 2019, and 94 percent of the eligible multifamily rental units financed by Freddie Mac were affordable to families earning at or below 120 percent of area median incomes.
 
“In 2019, Freddie Mac continued its solid financial performance, delivering $7.8 billion of comprehensive income, representing a 15 percent return on Conservatorship Capital,” said CEO David M. Brickman. “We invested in new ways to transfer risk, increased efficiency, and continued to position the company as the leader in housing. Importantly, last year we began the process of building equity to help us responsibly exit conservatorship.”
 
The Federal Housing Finance Agency (FHFA) recently contracted Houlihan Lokey Capital Inc. to serve as its financial advisor during the process of ending the federal conservatorship of the GSEs.

 
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