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Fannie Mae earnings falter as GSE gears up for even rougher 2023

GSE reported being "seriously undercapitalized" despite increase in net worth in 2022

Earnings at Fannie Mae in 2022 sank to $12.9 billion as the housing market deteriorated, down dramatically from $22.1 billion in 2021, the government sponsored enterprise reported Tuesday.

Last year’s $9.3 billion decrease in net income was primary driven by an $11.4 billion decline in home prices and a $1.6 billion shift to investment losses, which was partially offset by a $1.1 billion increase in fair value gains, the GSE said.

In the fourth quarter, Fannie Mae recorded $1.4 billion in net income, down from $2.4 billion in the third quarter and $5.2 billion a year earlier. In a slowing housing market, Fannie Mae also boosted its provision for losses for the third consecutive quarter.

“Our 2022 results reflect a housing market in transition. We’re proud that Fannie Mae helped approximately 2.6 million households buy, refinance, or rent a home last year, while generating solid earnings and continuing to build our net worth,” CEO Priscilla Almovodar said in a statement.

Almovodar, who took over late last year following a wave of departures in Fannie’s C-Suite, added that the GSE expects that “there will be economic headwinds in 2023 and that housing affordability will continue to remain a challenge for many homebuyers and renters.”

The GSE said its net worth reached $60.3 billion in 2022, up from $47.4 billion just a year prior. Despite the gain, it remains “significantly undercapitalized,” with a shortfall of $258 billion.

Fannie Mae’s single-family MBS issuances were $628 billion in 2022, down from $1.39 trillion in 2021 and $1.34 trillion in 2020, which Fannie staffers attributed to lower refinance activity due to higher mortgage rates. In a bright spot, serious delinquency rates remain low. On the single-family side, they accounted for just 0.65% in the fourth quarter, Fannie Mae’s 10K filing shows.

The GSE is forecasting total single-family originations to decrease by 29% in 2023, dropping from an estimated $2.36 trillion in 2022 to $1.69 trillion in 2023. Its economists project refi origination volume to be just $367 billion in 2023, down from $704 billion last year. It expects a “modest recession” to occur in the first half of the year, resulting in higher unemployment.

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