Real Estate Success in Music City: Inman On Tour: Nashville
Elevate your real estate success at Inman On Tour: Nashville! Connect with industry leaders and top speakers to gain insights, cutting-edge strategies, and valuable connections. Achieve your boldest goals with Music City magic. Register now.
Mortgage Giants Fannie Mae and Freddie Mac Continue Strong Performance
Fannie Mae and Freddie Mac are seeing strong revenue and profits, boosting their net worths and potentially paving the way for privatization. However, Treasury Secretary Scott Bessent has indicated that the Trump administration has other priorities for now, and any privatization plan should not result in higher mortgage rates for consumers.
Housing finance experts caution that the Trump administration may impose limits on the support Fannie and Freddie can provide to riskier borrowers. Placed in government conservatorship in 2008 during the Great Recession, the mortgage giants have shown significant progress, reporting combined 2024 profits of $28.9 billion, increasing their total net worth to over $150 billion.
Fannie Mae’s annual report revealed increased provisions for credit losses due to suspected fraud in multifamily loans. Despite this, the company’s multifamily business remains profitable and accounts for only a fraction of its revenue. The majority of Fannie Mae’s profits come from its single-family mortgage guarantee business, which backed a significant amount of home mortgages in 2024.
Freddie Mac also reported strong profits in 2024, with a significant portion coming from its single-family business. The company surpassed Fannie Mae in backing home loans last year, with a focus on purchase mortgages and refinancings.
Both Fannie and Freddie play a key role in the mortgage market by packaging mortgages into mortgage-backed securities that are sold to investors. These securities are considered safe investments due to the backing of Fannie and Freddie, ensuring investors receive payments even if homeowners default.
Freddie Mac Chief Financial Officer Jim Whitlinger highlighted the company’s acquisition of over 1 million loans in 2024, emphasizing the importance of packaging these loans into mortgage-backed securities to attract investors and support the U.S. housing market.
Last year, Freddie Mac purchased loans for cash and issued MBS totaling over $411 billion, representing an 18 percent increase from 2023. These funds helped nearly 1.6 million families buy, refinance, or rent a home,” Whitlinger stated.
Combined Net Worth of Mortgage Giants Reaches $154.3 Billion
Source: Fannie Mae and Freddie Mac earnings reports.
After repaying a $191 billion taxpayer bailout, Fannie and Freddie have been steadily increasing their net worth, with Fannie Mae’s net worth growing by 22 percent to $94.7 billion and Freddie Mac’s net worth increasing by 25 percent to $59.6 billion in 2024.
The Federal Housing Finance Agency estimates that the mortgage giants would need a total capital of at least $319 billion to withstand another significant housing downturn.
Despite improvements since 2008, Fannie and Freddie’s capital positions are not strong enough to prevent a Treasury draw in the event of a large loss, as noted in the FHFA’s annual report to Congress in June.
During his first administration, President Trump began the process of privatizing the mortgage giants, with efforts to continue this process reportedly underway even before his reelection in November.
Scott Bessent
Treasury Secretary Scott Bessent informed Bloomberg’s Saleha Mohsin that due to the expiration of Trump’s 2017 tax cuts and the upcoming debt ceiling deadline, the release of Fannie and Freddie from government conservatorship is currently not a top priority.
Many Democrats and Republicans agree that Fannie and Freddie should no longer be in conservatorship, but there is debate over whether mortgage markets should be fully privatized, potentially leading to increased mortgage rates, or if the government should maintain a backstop role.
Real estate industry groups, including the National Association of Realtors, advocate for continued government involvement in secondary mortgage markets. NAR has suggested replacing Fannie and Freddie with a new regulated private entity.
Bessent highlighted that the key factor in releasing Fannie and Freddie from conservatorship is the impact on mortgage rates, emphasizing the importance of ensuring rates remain stable before any action is taken.
Baseline Conforming Loan Limit, 2000-2025
Source: Federal Housing Finance Agency
Due to rising home prices, Fannie and Freddie can now purchase larger mortgages, with the conforming loan limit for single-family homes in most markets currently at $806,500. In high-cost markets, they can support loans of up to $1.2 million.
Despite this, Fannie and Freddie still work with many first-time homebuyers, allowing qualifying borrowers to make down payments as low as 3 percent. Freddie Mac assisted 426,000 first-time homebuyers in 2024, while Fannie Mae helped 391,000 renters transition to homeownership.
Almodovar highlighted the ongoing challenge of housing affordability for many consumers during a call with investment analysts.
From 2010 to 2023, median home prices increased by approximately 102%, while incomes only rose by about 64%. Fannie Mae is focused on addressing the affordability challenge by assisting consumers with limited credit histories and high up-front costs. The previous Trump administration had planned to restrict Fannie and Freddie’s purchases of “high-risk” single-family loans, but these limits were later revoked by the Biden administration. The share of purchase loans backed by Fannie and Freddie that would have been considered risky exceeded 10% at times in 2023 and 2024. Fannie Mae’s CFO, Chryssa Halley, noted that the credit profile of single-family mortgages remains strong, with average loan-to-value ratios of 50% and an average credit score of 753. Despite acquiring $55 billion in multifamily loans in 2024, Fannie Mae transferred credit risk on $26 billion of those loans to other entities. In total, Fannie and Freddie guaranteed $6.72 trillion in single-family mortgages by the end of 2024, with their workforce primarily located in the Washington, D.C. metro area. Freddie Mac had 8,076 full-time employees as of January 31, while Fannie Mae reported approximately 8,200 employees as of December 2024.