Fannie Mae Multifamily Reports Net Income for Q1 2020

Today, Fannie Mae filed its first quarter financial results for 2020. Though the COVID-19 pandemic has produced unexpected, extraordinary challenges, we continue to do business, providing liquidity to the market and affordable housing to people across the country. Thank you for working closely with us as we continue to adapt our practices and procedures to fit the needs of the current environment.

Below are some highlights from our filing.

Multifamily Business Highlights

• Multifamily’s net income was $393 million for the three months ended March 31, which included the impact of an increase in the allowance for loan losses due to losses we expect to incur as a result of the COVID-19 outbreak using an expected lifetime loss methodology consistent with our implementation of the Current Expected Credit Loss (CECL) accounting standard this quarter.
• Revenue for the quarter was driven by $806 million in net interest income. Approximately 75% of our multifamily net interest income in the quarter was derived from guaranty fee income, which continued to provide a stable driver of earnings for the business. The multifamily guaranty book of business reached approximately $345 billion in the first quarter of 2020, an increase of approximately 10% year-over-year.
• Working with our DUS^® Partners, Fannie Mae provided $14.1 billion in multifamily financing in the first quarter of 2020 and $18.1 billion for the fourth quarter of 2019, leaving $67.8 billion remaining under our current multifamily volume cap for the remainder of 2020. Multifamily provided liquidity for 159,000 units of multifamily housing in the first quarter of 2020. With over 90% of those units affordable to families earning at or below 120% of the area median income, our partnerships produced strong support for both affordable and workforce housing.
• In the first quarter, Fannie Mae Multifamily closed a Multifamily Connecticut Avenue Securities™ (MCAS) deal and a Credit Insurance Risk Transfer™ (CIRT) deal before our ability to issue new credit risk transfer deals became limited by COVID-driven economic turbulence.  These credit risk transfer transactions supplement the amount of credit risk on acquisitions that we already share through our DUS Program. Our credit risk transfer activities have allowed us to provide competitive execution and greater capital relief than our DUS program does on its own. As of March 31, 2020, the unpaid principal balance in our multifamily guaranty book of business is 98% covered by front-end lender risk-sharing. In addition to our front-end lender-risk sharing, 30% of the guaranty book of business is also covered by back-end credit risk transfer.
• The multifamily serious delinquency rate remained low at 0.05% as of March 31, 2020.  The substandard rate also remained low at 2.2%. These rates do not yet reflect the impact of the COVID-19 pandemic, and the company expects them to increase as loans enter into and remain in forbearance.

Company Highlights

• Fannie Mae reported net income of $461 million for the first quarter of 2020, compared with net income of $4.4 billion for the fourth quarter of 2019.  The company significantly increased its allowance for loan losses to reflect the loan losses it currently expects to incur as a result of the COVID-19 outbreak, which resulted in substantial credit-related expenses for the quarter.
• Fannie Mae’s net worth declined from $14.6 billion as of December 31, 2019 to $13.9 billion as of March 31, 2020. Although the company had $476 million of comprehensive income for the first quarter of 2020, its net worth declined as a result of a $1.1 billion charge to retained earnings due to its implementation of the Current Expected Credit Loss (CECL) accounting standard on January 1, 2020. Based on its agreement with the U.S. Department of the Treasury, the company may retain quarterly earnings until its net worth reaches $25 billion.
• Fannie Mae provided more than $204.6 billion in liquidity to the mortgage market in the first quarter of 2020, helping families across the country to own or rent a home through the financing of approximately 854,000 home purchases, refinancings, and rental units.

More information is available here:
Q1 2020 Form 10-Q
Q1 2020 News Release
Q1 2020 Financial Supplement