Fannie Mae earned $5 billion of net income in the first quarter and provided $422 billion for mortgages, enabling people across America to refinance a home, purchase a home, or finance rental property.
“This last quarter was the second biggest nominal volume quarter in our history,” said Fannie Mae CEO Hugh R. Frater.
The one caveat, Frater said, is that given the continued surge in volume, “our net worth to asset ratio barely moved. Our capital requirement actually increased this quarter. In my view, this undercapitalization is unsustainable, and it exposes the taxpayer and the housing finance system to risk.”
Overall, Frater said, the housing and mortgage markets have stood up well to the pandemic.
“Yet the pandemic has also highlighted the ways in which our housing finance system continues to fail many of our working families. Serving these families better will require a change from today’s status quo.
“We cannot just accept things the way they are – not us, not the mortgage industry, not the home builders, not the REALTORS®.”
Frater said he welcomed last week’s announcement by FHFA of RefiNow™, a new refinance option to make it easier for qualifying low-income borrowers to reduce their housing costs.
“This is just one small step and we hope our partners in industry will embrace the challenge.”
As Fannie Mae implemented programs that provided relief to homeowners and renters who were adversely impacted by the pandemic, “we handled record volumes of mortgage prepayments and new acquisitions as borrowers took advantage of low interest rates and a booming housing market,” said Celeste Mellet Brown, Fannie Mae’s CFO and Executive Vice President.
“These contrasting circumstances of the pandemic for borrowers and renters underscore our role in supporting America’s mortgage markets in good times and bad – and what often goes unremarked upon is how little disruption there has been to the mortgage market despite these stresses and strains,” she added.
Overall a Good Quarter
The housing market remained robust in the first quarter, with an unseasonably strong 3.4% increase in home prices amid continued low interest rates. First quarter mortgage acquisitions of $422 billion was down 7% from the record fourth quarter. Refinancing activity remained near fourth quarter’s record levels. Refinancing was 75% of first quarter single-family acquisitions compared to 71% in the fourth quarter and 64% a year earlier.
Looking at the year ahead, Fannie Mae expects strong real gross domestic product (GDP) and employment growth as the pace of vaccination programs improves and many COVID-related restrictions are being lifted. Additionally, it’s anticipated that the recently passed stimulus bill and the continued build-up of household savings will support greater consumer spending levels.
Nonetheless, economic risks and uncertainty remain. The possibility of new COVID variants emerging, the extent of consumer willingness to return fully to pre-pandemic economic activity, the impact of potential supply chain disruptions, and the pace of future inflation all represent risk to our outlook.
Home sales were minimally affected by rising mortgage rates through the first quarter, though a further jump in interest rates is a risk. “We expect ongoing tight housing supply to drive strong home price growth of nearly 9% this year, but the lack of for-sale inventory could remain a headwind for home sales,” Brown said.
Freddie Mac Report
Freddie Mac supplied $377 billion of liquidity to the single-family and multifamily segments in the quarter, assisting 1.4 million families purchase, refinance, or rent a home – a significant increase compared with the 637,000 supported in the first quarter of 2020.
Also, in the quarter, Freddie Mac took action to reduce the pandemic’s destabilizing effects on homeowners, renters and the markets:
Extended single-family foreclosure and eviction moratorium (approximately 12 million homeowners) until at least June 30.
Extended forbearance to a maximum of 18 months for approximately 230,000 single-family borrowers remaining in forbearance.
Extended COVID-19 related forbearance to qualifying multifamily property owners for another three months to June 30. And, tenants of those properties remain protected from eviction for non-payment of rent.