Unlike its government-sponsored enterprise counterpart, Fannie Mae had a great year in multifamily in both production and on its bottom line.
Both Fannie Mae and Freddie Mac grew their multifamily portfolios by sizable margins in 2018, but Freddie Mac saw its net income from multifamily fall by $700 million due to “spread widening during 2018 which resulted in fair value losses on mortgage loans and commitments and mortgage-related securities.”
Fannie Mae, on the other hand, saw its net income from multifamily rise from $951 million in 2017 to $2.21 billion in 2018, an increase of approximately $1.3 billion.
The reason for the increase? The impact of the Tax Cuts and Jobs Act of 2017, which led the GSE needing a draw last year from the Department of the Treasury of $3.7 billion. That was the first time the GSE needed money from the government since 2012.
The tax implications of the bill, explained in more detail here, was the primary cause of Fannie Mae’s lower multifamily income in 2017, the GSE explained.
“The increase in multifamily net income in 2018 was driven primarily by the absence of a one-time charge for federal income taxes recorded in 2017 that resulted from the enactment of the Tax Cuts and Jobs Act of 2017,” the GSE said in its 4th quarter earnings statement.
“The increase also was driven by an increase in guaranty fee revenue as the multifamily book grew during the year,” Fannie Mae continued. “This was partially offset by a decrease in fee and other income driven by lower yield maintenance revenue as a result of rising interest rates.”
And just like Freddie Mac, Fannie Mae saw its multifamily portfolio grow in 2018.
According to the GSE, its multifamily portfolio topped $300 billion during the 4th quarter, finishing up the year at $305.9 billion. That’s up nearly $30 billion over the course of the year.
At the end of 2017, Fannie Mae’s multifamily portfolio was $277.3 billion.
Fannie Mae may have made more money in 2018 and its multifamily portfolio may be larger than Freddie Mac’s, but Freddie Mac has it beat when it comes to financing units last year.
According to Freddie Mac, it financed 866,000 units last year, while Fannie Mae supported 777,000 units of multifamily housing in 2018.