Fannie Mae notches $5B in profits in Q2, but still expects a recession

Fannie Mae netted $5 billion in profits in the second quarter, up $1.22 billion from the first three months of the year.

Executives attributed the swollen profits to the continued strength of home prices, which have risen 5% in the first six months of the year.

In fact, Fannie Mae is no longer predicting a decline in home prices in 2023. The government sponsored enterprise‘s forecast now calls for a 3.9% home-price increase this year, though a recession is still in the cards.

“The economy has remained more resilient than we expected earlier in the year, but we believe it is still on a decelerating path and additional drags are likely forthcoming,” Chryssa Halley, Fannie’s chief financial officer, said on the second-quarter earnings call on Tuesday. “While noting the probability of a soft landing may have increased of late, our economic and strategic research group expects the economy will enter a modest recession in the fourth quarter of this year or the first quarter of next year.”

Here are some highlights from Fannie Mae’s second quarter:

  • Single-family conventional acquisition volume was $89.2 billion in Q2 2023, up 32% over the first quarter’s $67.5 billion.
  • Purchase acquisition volume, 45% of which was for first-time homebuyers, increased to $76.4 billion from $56.5 billion in the first quarter. Refinance acquisition volume was $12.8 billion in the second quarter of 2023, up from $11 billion in the first quarter of 2023.
  • Fannie Mae provided $104 billion in liquidity to the mortgage market in the second quarter of 2023.
  • Average single-family conventional guaranty book of business in Q2 2023 declined by $1.4 billion from the first quarter of 2023, driven by acquisition volumes being lower than loan paydowns during the quarter. Credit characteristics for single-family conventional remained strong, with a weighted-average mark-to-market loan-to-value ratio of 51% and a weighted-average FICO credit score at origination of 752 as of June 30, 2023.
  • Single-family serious delinquency rate decreased to 0.55% as of June 30, 2023 from 0.59% as of March 31, 2023.
  • Average charged guaranty fee, net of TCCA fees, on single-family conventional remained relatively flat at 46.8 basis points as of June 30, 2023, compared with 46.6 basis points as of March 31, 2023.
  • Fannie’s net worth increased to $69 billion, up from $64 billion a quarter ago.

Fellow GSE Freddie Mac will disclose its second quarter earnings on Wednesday.