Earnings call transcript Q1 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Fannie Mae First Quarter 2023 Financial Results Conference Call.

At this time, I will now turn it over to your host, Pete Bakel, Fannie Mae's Director of External Communications.

Pete Bakel

Hello, and thank you all for joining today's conference call to discuss Fannie Mae's first quarter 2023 financial results. Please note, this call includes forward-looking statements, including statements about Fannie Mae's expectations related to economic and housing market conditions, their impact on our business and financial results and factors that will affect them, the future performance of the company's book of business, the company's business plans and their impact and the company's financial results and the factors that will affect them.

Future events may turn out to be very different from these statements. Form in and first Forward-Looking that the in company's section XX-Q XXXX Statements may statements February the today on results. filed Risk XXXX lead forward-looking to the describe quarter company's Form sections XX, different The XXXX, filed factors XX-K Factors and

be any this that call company's for broadcast on and website. full not We A recording posted do this of ask do record publish not you transcript. call may the that you public

to over Financial call Mae the Halley. turn to like and Chief now Officer, Executive Mae Almodovar; Officer, Fannie Priscilla I'd Chief C. Fannie Chryssa

Priscilla Almodovar

Welcome. of us current discuss spending economic you in I'll over it XXXX. in financial Chief I'll the a turning results more before detail. start performance to our then Officer, will hand Thank by who for our Chryssa joining Halley, environment and our to on quarter few Financial quarter first minutes first mission today. the

added the existing surprise the quarter in no that of uncertainty. backdrop first turmoil it's While the economic sector to banking during the

housing, basis rates impact time began which rate X.XX%, year. XX-year the a points ended than one higher still was fixed same at mortgage XX but XXX than year, rate where quarter the basis lower at it the points mortgage was for last Specifically

increase echos pent-up prices significant constraints. these affordability Home in be The home housing annual home responded sentiment that sales is continues X%, since for and to increased pace prices challenges. modest decline despite continued XXXX. Consumer to yet this slowest at their demand there ongoing evidence

high prices purchase. a to renters it preventing concerns national responded buy are is time their housing bad home In survey, home fact, primary that XX% that recent and in a indicated home, consumers our a most making of

we of with quarter year. the to see quarter As to single-family of in year, market, and year time lower less mortgage volumes than billion saw decline a originations in the this at fourth than estimated market's half the expected, the XX% $XXX in the first billion the originations this is of same across we single-family an in $XXX be last continued last

the constrained on Reduced the levels that are and counterparties, am pressures since generating mortgage uncertainty demonstrate of results housing Fannie market our to and Mae I and the economic managing and lowest focused a following stability employment volumes of closely. and to In to strong remained on stay buyers, the risk XXXX. lender time economy. continued doing so, that qualified lender strength support These banking notable broader volatility we risk. pleased we effectively a during source Overall, system in margins trends industry contributed finance this financial

to performance. challenging turning our first reported net operating $X.X and $X.X environment, billion the billion Despite in Now in revenues. net quarter we income

through our worth retained a to As which able of billion continue of to to we build net $XX were earnings as end increased the result, March.

mortgage provided XXX,XXX the rental housing, multifamily so, a significant at were single-family volumes were to we earning included a affordable been of income. of median While households XXX% in multifamily buy, doing approximately below lowest they've our households XX,XXX refinance of quarterly rent acquisition we or majority the to This area units $XX XXXX, billion and home. which In helped liquidity to markets. since still or

homebuyers first-time XX,XXX empowered also a We to purchase home.

how for our We've we homeowners American renters of these business. results effectively be been to generate risks there manage able and the strong and of because

our today ability the economic across expand actively environment. existing to and including the midsized of risk and and our we earnings, to liquidity. to maintain credit mortgage book, quality we financial which for our we credit We current they retain We monitor lastly, resilience. significant small monitor and borrowers counterparty our example, For responsibly sound, and as serve remains regulatory nonbanks banks of partners, actively because access for respond many the

Now quality equitable facilitate across ownership rental and let access sustainable America. exists housing our to and to home to Mae affordable me Fannie turn mission.

As in action. I our did to share examples mission on our last like a of few call, I'd

to borrower's we on-time rent not the been continue from historically help underwriting or homebuyers which potential score included in credit payments, have process. mortgage benefit First, in a

to rent renters to payments multifamily reporting time score positive who Our choose their I'm incentivizing payment their credit and property rent participate. credit September helps by XXXX, improve for pilot history build tenants their proud on owners over average onboarded an Since points residents previously residents their X,XXX we've credit that improvement, XX over say to there saw helping had score. an establish who scores. including score improvement existing and XXX,XXX of The to an was households, credit report

their of XX%. Similarly, majority recurring rent for we've percentage consider renter's a than eligibility encourages first-time history rent the XXXX, payment rent consistent September Since are qualify part tracks helped more X,XXX on-time home of mortgage. incentive lenders a payments residents of using homebuyers minority our for program the as of assessment to of a a payments. nearly in initiative a Importantly, positive mortgage history history single-family with lenders

payment due our Another use for COVID learned deferral through deferrals payment great of of lessons pandemic. options the financial other These have hardships. In their borrowers comes include example April, during allowing change payments resolved that the changes out past but who we updated their borrowers loan. remain those this more hardship, in help homes. to months the will unable to are of X to cure their defer payments of to end hope We their up

Sustainable the Mae's Finally, in Plan identify competition populations Equitable in nationwide Challenge, promote that to some that industry to historically plus equity of projects support million we housing. updated Innovation Housing we projects based underserved innovative from racial included our new housing $X Finance in journeys, their Fannie on actions feedback, our Communities came

stability for lenders. and of mission. for source and members, steady Mae remains testament system, Mae, being industry and we up, To our our financial dedicated transformation to on how strength of of Fannie the a our proud I team am quarterly results to of homebuyers wrap is our partners. to years and continue finance housing of execute committed This source a Fannie

able management This liquidity. of because facilitate to sustainable housing. changes were is our us equitable focus improve and what to to the allows the strong to do of made resilience rental and affordable, we've so to on access and continue business, our We homeownership risk

Now I'll to Chryssa quarter discuss over financial to it our first results. turn

Chryssa Halley

morning. and Priscilla, good you, Thank

reported As $X.X net of billion Priscilla in mentioned, quarter the this $X.X income we quarter, a to compared increase fourth billion XXXX.

fourth we approximately lower Our quarter where driven an remained first amortization primarily from strong, This by income. quarter revenues was net interest million of $X.X income. recorded the $XXX decline billion

March loans activity, rate Over XX average single-family mortgage refinance end our XX-year XX% because rates. an rate refinancing Amortization first date, income quarter. which points during book declined had the as interest resulted fewer of of of the the of than prepayments lower loan basis from low over for X.X%, lower a that below a current likelihood these of interest in at fixed would resulting rate as

year of losses provision we recorded by in fourth income for a the this losses modest to decline credit benefit. other due investments was short-term provision, billion the increase amortization than a for lower single-family was quarter, million, higher portfolio offsetting The significantly approximately multifamily first by in income yields. quarter $X.X the of in partially for offset credit first an XXXX. driven quarter the the was of provision provision $XXX credit the In from Partially our

related benefit by was adjustable to including to in credit forecasted substantially and uncertainty the driven continued on provision prices, provision declines housing due acquired in primarily related The multifamily newly home seniors by The offset property actual to primarily was single-family loans, rate loans. values uncertainty improvements loans. and a

of interest loans rate single-family to the the turn the quarter XXXX. business first share third some to quarterly to environment, volume we our single-family constraints Due affordability highlights. me quarter, Let $XX.X of supply, lowest and acquisition billion our limited acquired housing since in

which quarter XXXX, lower by to than the driven by ratios the than refinances. declined our million have typically loan-to-value single-family higher paydowns quarter. fourth acquisitions book XX% single-family loan of being acquisition $XXX average purchase Our were of during compared approximately volumes mortgages,

first strong, had XX% loan-to-value loan be and weighted to ratio acquisitions origination quarter over score single-family a Our credit a weighted of first of of our Credit these continued scores had XX% acquisitions loan-to-value XXX. of origination. at at average with a ratio at XX% single-family quarter origination of average acquisitions

book. XX% XXX loan-to-value of credit Overall March. mark-to-market of to as credit remain characteristics average with of origination weighted single-family a at of score end average a Turning the weighted ratio and our strong

basis single-family rate as delinquency serious XX the Our points. of was end the first quarter of

recent is credit the lowest serious the on seen level an this we of performance could our delinquencies to or increase which to since single-family While our lead the in performance, XXXX based will expect rate. compared in delinquency have environment, decline loans we guarantee book higher the macroeconomic

these to covered through XX. Finally, XX% first part enhancements $XX.X of portion credit we risk billion as book transfer in due program, was year, the quarter a guarantee of the our on of risk credit March mortgages this transferred of credit our of in single-family by efforts

billion acquired in significant of less Now let's in year, workforce billion housing. XXXX, $X.X and cap talk overall $XX.X for which decline the market. fourth first a of was quarter of volume affordable $XX the compared This We by quarter vital against an about provided multifamily billion our for the majority both multifamily driven our activity multifamily support last business. loans to

of service profile X.X XX% average of weighted multifamily coverage a a debt the of our loan-to-value strong, weighted ratio with credit original as average The book ratio remains and times. whole

stressed especially loans, shared rate as multifamily remain quarter. those last seniors housing adjustable our However, are that we mortgages

the was driver of points delinquency increase the an to basis of rate basis the end portfolio XX For example, our quarter. of year-end serious primary XX seniors multifamily of as points housing in from first as

of payments, adjustable book rising lower was multifamily ratios. of March, borrowers monthly XX% adjustable environment, As mortgages debt which have the will rate In end of of seniors mortgages. our book with comprised may our higher rate their multifamily and of XX% coverage a service rate

to be I'll outlook. take of on default. a loans or expand our and our economic book moments current now that monitor continue multifamily further may actively at to manage deterioration few We risk

recession As Priscilla continue modest to we last expect a in quarter, mentioned XXXX.

than we begin half. in year expect Although second first now the recession of rather the half the the will

part consumer and dampen business in business and spending, could The activity. Bank to credit failures of confidence are bank stress recessions. tighten hiring banking investment, reduced often lead conditions, and further consumer

increase our demand in However, first housing in future sales response pent-up quarter recession. expectation the the earlier rate in in that the will home sector illustrates any small moderate rapid to the help declines

slightly trillion forecast originations mortgage originations. reduced quarter, average single-family with driven or you XXXX mortgages purchase the our will X% spoke in XX-year be we expectation approximately for XX% we rate our trillion, anticipated in to single-family total to This mortgage are XXXX. fixed by is last in $X.XX of that part Since $X.XX

X.X% decline mortgage recession modest prices already due expected XXXX. and home discussed. continue compared rates, a expect the currently national basis continued on will low will single-family to elevated XXXX decline to We sales in home We to home affordability anticipate activity

home the However, we in year X.X% less primarily estimated shared reflects in than is previous and quarter the expect regional price decline variation we for changes. price home first appreciation. forecast our decline This X.X%

predict originations and In multifamily, between XXXX we $XXX to continue $XXX million million.

expect levels of rent elevated stagnant continued also growth rental demand, vacancy new construction job softening with in We growth. with levels the higher slowing in coupled and XXXX and

it for continue year, to full income. GSE the As our project we relates revenues to steady

expect amortization We expectation XXXX activity our by significantly low. income remain lower that driven also will in compared refinancing XXXX with

we However, interest partially other in higher our to income offset our amortization decline a be investments expect by portfolio. income on

based materially could many results differ our are our current assumptions on expectations actual and expectations. Our from

into for with reminder, a you our insights financial available us pages web supplement provides make we a on additional Thank business. today's today. our joining filing that As

Federal National Mortgage Association (FNMA) 2 May 232023 Q1 Earnings call transcript