Fannie Mae Q3 2024 Financial Results

Fannie Mae (FNMA (ST:FNMA)) reported a decrease in net income to $4 billion for Q3 2024, down from $4.5 billion in Q2. Despite providing substantial liquidity to the housing market, President and CEO Priscilla Almodovar discussed the challenging economic conditions affecting both housing and the company's financial performance. She emphasized Fannie Mae's commitment to supporting those impacted by natural disasters and its ongoing mission to enhance housing accessibility.

CFO Chryssa Halley detailed the financial results, addressing the impact of hurricanes on credit losses and projections for home sales and price growth.

Key Takeaways

• Fannie Mae's net income decreased to $4 billion in Q3 2024, down from $4.5 billion in Q2.
• The company provided $106 billion in liquidity to the housing market, assisting 383,000 households.
• The 30-year fixed-rate mortgage averaged 6.5%, with existing home sales expected to be the lowest since 1995.
• Home prices rose by approximately 1% during the quarter, totaling 5.9% growth since the start of the year.
• Affordability continues to be a significant barrier for potential homeowners and renters.
• Fannie Mae is using rent payment data and exploring social bonds to improve housing accessibility.

Company Outlook

• Fannie Mae's economics team projects 4.8 million total home sales in 2024, with a slight rise to 5.2 million units in 2025.
• Home price growth is expected to slow to 3.6% in 2025 after a 5.8% rise in 2024.
• Single-family mortgage originations are anticipated to increase from $1.5 trillion in 2023 to around $1.7 trillion in 2024.
• Multi-family market origination volumes are projected at $275 billion in 2024, down from $480 billion in 2022.

Bearish Highlights

• The benefit for credit losses decreased by $273 million in Q3.
• The multi-family provision for credit losses increased due to ARM loan write-downs and modest decreases in expected property values.
• The multi-family serious delinquency rate increased to 56 basis points at the end of September.

Bullish Highlights

• Fannie Mae's net worth grew to $90.5 billion, enhancing financial stability.
• The company reduced its minimum regulatory capital shortfall by $17 billion since the beginning of the year.
• Single-family loan acquisitions rose by 8% due to seasonal activity and lower mortgage rates.

Misses

• Declining interest rates led to smaller fair value gains, recording only $52 million in Q3 compared to $474 million in the previous quarter.
• The single-family serious delinquency rate increased slightly from 48 to 52 basis points.

Q&A Highlights

• The call did not include a Q&A session.

In conclusion, Fannie Mae is navigating a challenging housing market with a focus on providing liquidity and supporting affordable housing initiatives. While net income has decreased, the company's efforts have contributed to its financial stability and ongoing mission to improve housing access in the U.S.

InvestingPro Insights

Fannie Mae's financial landscape, as revealed by InvestingPro data, offers additional context regarding the company's recent performance amid a changing market. Despite the decline in net income, Fannie Mae's revenue growth stood at an impressive 31.86% over the last twelve months as of Q2 2024. This reflects a strong underlying business performance that aligns with the substantial liquidity provided to the housing market.

The company's market capitalization of $8.03 billion indicates its influential presence in the mortgage finance sector. However, it is important for investors to note that Fannie Mae is currently trading at a Price to Book ratio of -0.15, which is unusually low and may encompass the inherent complexities of its operational and regulatory environment.

Delving deeper, InvestingPro Tips highlight several crucial aspects for potential investors. Firstly, Fannie Mae operates under a considerable debt burden, which is typical for its role in the mortgage market, yet necessitates diligent financial management. Secondly, analysts anticipate sales growth in the coming year, coinciding with the company's forecast for increased mortgage originations in 2024.

Investors should also consider the current volatility of Fannie Mae's stock price, which has risen by 21.19% over the past month but has experienced a 2.72% decrease over the last six months, indicative of the ongoing uncertainty in economic conditions and housing market challenges.