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Fannie Mae's Q3 net income dips amid housing market challenges

Published Nov 01, 2023 10:28AM ET
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Fannie Mae reported a decrease in its net income to $4.7 billion in Q3 2023, down from the previous quarter, amidst a challenging housing market characterized by high mortgage rates, soaring home prices, and increasing rents. The decline in net income was partly due to a reduction in benefit for credit losses, which fell to $652 million from $1.3 billion in Q2 2023. This was attributed to write-offs related to the redesignation of certain loans due to increases in single-family home prices.

Nonetheless, the firm continued to play a significant role in the mortgage market, injecting $106 billion and acquiring approximately 224,000 single-family purchase loans. Over 45% of these were for first-time buyers. The company also financed about 159,000 affordable multifamily rental units and 45,000 refinance loans.

The single-family conventional guaranty book grew by $5.5 billion due to an increase in average loan size, while the serious delinquency rate fell to 0.54%. The charged guaranty fee remained stable at 47.0 basis points.

Despite these efforts, Fannie Mae's CEO Priscilla Almodovar highlighted rising mortgage rates, high home prices, a housing supply shortage, and climbing rental costs as significant challenges impacting the sector. The 30-year fixed-rate mortgage rate increased from 6.71% at the end of Q2 to 7.31% at the end of Q3. National home prices also grew by 1.7% in Q3 compared to a 3.8% rise in Q2.

On the multifamily front, business volume rose from $15.1 billion in Q2 to $16.4 billion in Q3 with the guaranty book growing by 2% to $464.7 billion. However, the serious delinquency rate also increased from 0.37% to 0.54%.

Despite the decrease in net income, Fannie Mae's actions resulted in an increase in the GSE's net worth to $73.7 billion, assisting 428,000 households, many of whom were low- to moderate-income borrowers and first-time homebuyers. The company also saw an increase in fair value gains, which rose to $795 million, and strong net interest income driven by base guaranty fee income.

InvestingPro Insights

Drawing on real-time data from InvestingPro, Fannie Mae's market cap stands at $4290M USD, with a P/E ratio of -373.50, implying that the company is currently not profitable. Over the last twelve months as of Q2 2023, the company's revenue was $24.34B USD, representing a decline of 25.86% in revenue growth. Despite this, the company has seen significant returns with a 1 month price total return of 20.68% and a 3 month price total return of 69.39%.

InvestingPro Tips highlight that while Fannie Mae has seen a declining trend in earnings per share, it has demonstrated a strong return over the last three months. The company is a prominent player in the Financial Services industry and its stock generally trades with high price volatility. Importantly, the company's liquid assets exceed short term obligations, providing financial stability.

For more insights, InvestingPro offers a comprehensive list of additional tips and data metrics for Fannie Mae and other companies. Enhance your investment decisions with InvestingPro.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Fannie Mae's Q3 net income dips amid housing market challenges

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