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Rising interest rates hindered mortgage giants Fannie Mae and Freddie Mac from growing their portfolios last year, but strength in home prices helped both companies post double-digit growth in profits and net worth.
At $17.4 billion, Fannie Mae’s net income was up 35 percent from a year ago, while Freddie Mac boosted net income by 13 percent, to $10.5 billion, the companies reported this week in quarterly and full-year earnings calls.
“The strength in home prices throughout the year had a direct impact on our earnings, largely due to the release of credit reserves that reflected higher actual and forecasted home prices,” Fannie Mae CEO Priscilla Almodovar said on an earnings call Wednesday.
Fannie and Freddie profits, 2018-2023
Source: Fannie Mae and Freddie Mac annual earnings reports.
Chris Lown
Freddie Mac Chief Financial Officer Chris Lown also said the company’s growth in 2023 net income was driven primarily by rising home prices, which allowed the company to release $872 million in credit reserves in the single-family business. In 2022, deteriorating housing market conditions prompted the company to boost provisions for losses by $1.8 billion.
The mortgage giants’ bottom lines were also boosted by controversial changes to upfront fees, known as loan level price adjustments (LLPAs), implemented last spring. Fannie and Freddie’s federal regulator, which also eliminated upfront fees for first-time homebuyers of limited means, said the price adjustments were aimed at helping the companies improve their capital positions.
Fannie Mae Chief Financial Officer Chryssa Halley said 2023 revenues were helped by “healthy guaranty fee income” and higher yields…