On an early August morning, Mayopoulos, and Chief Financial Officer David Benson gathered in a room for a conference call. Just like in quarters past, Mayopoulos took the lead role, with Benson providing support and answers for more technical, financial questions. It could be the last time for Mayopoulos, but Benson was remarkably relaxed. And he should be. He’s about to become president of a company on firm footing.

“Fannie Mae reported one of its best quarters in the last three years [that] morning,” said Jim Vogel, a strategist for FTN Financial who publishes regular reports on Fannie Mae. “Second quarter net income reached $4.5 billion, also the results for comprehensive income as well.  Pre-tax figures confirm the improved performance before incorporating a lower tax rate.” Tim Mayopoulos and David Benson

But there’s a catch, Vogel mentioned: “As FNMA was already above the $3 billion equity level in the first quarter, it will send

Treasury a check for the entire amount of comprehensive income at the end of this quarter.”

Such is life under the yoke of the Federal Housing Finance Agency, the regulator in charge of Fannie, as well as Freddie Mac. All profits get funneled back to the federal government and, though this quarter marked a profitability milestone, as Vogel mentioned, no one really took note; we are all used to Fannie Mae performing well, at this point, which is pretty impressive, if under reported.

For example, mortgage rates climbed higher the same week Fannie reported its great quarter, reaching its fourth highest level of 2018, according to Freddie Mac’s latest Primary Mortgage Market survey. Add this to mortgage apps that are largely stalled and there are big economic problems at play.

“The higher rate environment, coupled with the ongoing lack of affordable inventory, has led to a drag on existing-home sales in the last few months,” Freddie Mac Chief Economist Sam Khater said. “The Federal Reserve passed on raising short-term rates, but with the embers of a strong economy potentially stoking higher inflation, borrowing costs will likely modestly rise in coming months.”

At a two-day meeting that ended the same week Fannie reported its second quarter earnings, the Fed voted unanimously to keep its benchmark federal-funds rate in a range of 1.75% and 2%. In a statement, the Fed noted that job gains and economic activity have been “strong.”

“The FOMC expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2% objective over the medium term,” the Fed said.

Regardless of current, challenging market conditions, Mayopoulos is not concerned about the health of Fannie Mae with his departure looming, as he puts it, “mortgage lending will normalize in time.”

“A lot of factors are beyond our control,” he said. Mayopoulos bemoans the lack of supply for potential homebuyers and believes that solutions will not be an easy fix. Current homeowners are living more conservatively, he noted, and not as pressed to move up the property ladder. Further, more and more seniors need to be allowed to age in place, which will not ease the supply burden, either.

Furthermore, the rising costs of labor, materials and land itself is preventing construction from moving forward meaningfully. Plus, he sees more localities intervening and trying to prevent new neighborhoods from being built. “Entry-level is dead,” as he put it.

Fannie Mae veteran Benson will become president, giving him control over the day-to-day business operations.

Benson has been with Fannie Mae for 16 years, including five years as executive vice president and chief financial officer. The search for the new CEO is now underway.David Benson

As part of the leadership shake-up, Celeste Brown will replace Benson as executive vice president and chief financial officer. Brown joined Fannie Mae a year ago after 18 years at Morgan Stanley, where she worked as an equity analyst, head of investor relations and global treasurer.

“We’re going to miss Tim,” Benson told me recently, in the run-up to Mayopoulos’ departure. “He’s still here, so we haven’t felt it, but it’s coming.”

Benson is ready and willing to take on a larger role. 

“We’ve all personally worked with the officer corps, we collectively work on the strong vision of Fannie Mae and have momentum around our strategy and can handle the evolutions that come through the markets.”

“But, we are going to miss him for sure,” Benson concluded.

“Fannie Mae is better now in so many different ways,” Mayopoulos adds, after taking a moment of reflection. “It’s in a position of greater humility. I’m leaving the company in better shape than I found it.”

We couldn’t have asked for anything more.