Fannie Mae g-fee gains outweighed by loss provisions, valuations

Fannie Mae’s net interest income from its core business rose during the fourth quarter, but its net earnings fell due largely to loan-loss provision adjustments and interest rate-related negative valuation changes.

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The government-sponsored enterprise earned $3.5 billion and generated nearly $7.3 billion net interest income during the fourth quarter of 2025. 

In comparison, its bottom line result was $4.1 billion during the same period a year earlier and $3.9 billion the previous quarter. It generated roughly $7.2 billion in NII during both comparable periods. 

“Our earnings continue to be driven by our core business, where we earn guarantee fees in exchange for providing credit protection on mortgage-backed securities we issue in the secondary market,” Chief Financial Officer Chryssa Halley said during the GSE’s earnings call.

The majority of fair value losses that contributed to the decline in net income were driven by the compression in interest rate spreads, which are not covered by hedge accounting, she said.

Because of this and other adjustments, Fannie reported $14.4 billion net income for 2025 as a whole, compared with 2024’s $17 billion. This marks the company’s 14th consecutive year of profitability since it was forced into government conservatorship by a financial crisis in 2008.

Peter Akwaboah, Fannie’s acting chief executive, called the results “solid” during the earnings call, noting that liquidity the company provided to the mortgage market supported 1.5 million households’ ability to refinance loans, buy or rent homes during the past year. 

Fannie cut administrative expenses by $40 million and total non-interest costs by $141 million compared to 2024, reducing its workforce by roughly 1,200 employees, scaling back contractors and renegotiating contracts, Halley said. However, Fannie incurred elevated quarterly expenses with severance and costs associated with reduction in its real estate footprint contributing.

“For the first time in four years we reduced annual administrative expenses, positioning the company for long-term success,” said Bill Pulte, director of US Federal Housing, in a statement. USFH, traditionally known as the Federal Housing Finance Agency, is Fannie’s conservator.

Net worth, a key capital measure closely watched in Fannie’s long-term plan to exit conservatorship – and a potential stock offering that the Trump administration has been mulling – was $109 billion at the end of 2025. 

Fannie’s net worth has been steadily growing. It was $105.5 billion the previous quarter and $95 billion at the end of 2024. 

“Since January 2020, we have increased our net worth by $95.5 billion including $48.7 billion since we began reporting our capital position under the enterprise regulatory capital framework for the fourth quarter of 2022,” Halley said.

Credit loss provisions and comparisons

Typical consensus net income estimates ahead of earnings available through Standard & Poor’s Capital IQ Pro are less pertinent for Fannie, since it was forced into government conservatorship in 2008. 

The pre-earnings consensus estimate for credit losses, which has generally been a key driver of quarterly variations in Fannie’s earnings, had been $379 million, as compared to the $298 million it reported for the period. 

Serious delinquencies in Fannie’s single- and multifamily books of business have been inching up but are still below 1% at 0.58% for the former and 0.74% for the latter.

Total risk weighted assets increased by 3% while risk density grew by one percentage point from the prior quarter to 31.9%. Higher credit risk weights on new acquisitions contributed to this. Reduced capital relief from credit risk transfer runoff also contributed.

“We continue to use CRT as a tool to manage regulatory capital, and over the last few years, we have enhanced our CRT program to increase its effectiveness in providing capital relief while reducing premium in deal costs,” Halley said.

Loan acquisition totals and breakdowns

Fannie acquired $97 billion in single-family mortgages during the quarter with home purchase loans accounting for $60 billion of the total and refinancing accounting for the remaining $37 billion. 

In the previous quarter, Fannie acquired $90 billion in single-family loans, including $72 billion in mortgages taken out by homebuyers and $18 billion in refinancing. A year earlier, the quarterly total was $85 billion with $62 billion purchase loans and $23 billion in refinances.

Fannie primarily acquires single-family mortgages but it also has limited involvement in the multifamily market. Multifamily acquisitions increased 38% from the prior quarter, bringing the total for 2025 to a five-year high at $73.7 billion, Halley said during the earnings call.

MBS buying and analysts’ views

The GSEs also announced in January they plan to buy $200 billion in mortgage-backed securities to lower rates at the administration’s direction, and Halley commented briefly on how Fannie has and will pursue this goal during the earnings call.

“We increased our holdings of agency MBS this year to achieve higher returns and support market and lender liquidity,” she said. “We plan to continue investing in agency MBS while remaining in compliance with portfolio limits and managing the interest rate risk associated with our retained mortgage portfolio.”

BTIG, which recently initiated coverage of Fannie, estimated last week that MBS purchases could add around $500 million to future earnings at each of the GSEs.

While the Trump administration is showing more near-term interest in affordability initiatives like this than a stock offering and one rating agency’s recent research report questions how easy it would be to execute, some equity researchers are saying they see some viable paths.

Deeming Treasury’s senior preferred stock as repaid and exercising the warrants for 79.9% of Fannie’s common stock “is perhaps the most seamless and rational starting point toward an eventual exit from conservatorship,” BTIG Managing Director Eric Hagen said in a report.

Hagen added that “there could be higher near- and longer-term upside if it’s paired with reducing the capital requirements” Fannie has under a regulatory framework the enterprises have.

“That would help further clarify the timeline to exit conservatorship, while also supplying the company with necessary capital and flexibility to explore solutions which help drive housing affordability,” he added.

Researchers’ take on stock offering odds, growth potential

Other stock analysts at Keefe, Bruyette & Woods have put higher odds of 50% on a conversion of the senior preferred shares to common compared with 30% for a conversion with the senior preferred forgiven, according to a December report by Bose George and Frankie Labetti.

“However, we think privatization in 2026 could be challenging since it remains unclear if it is enough of a priority for the Treasury and FHFA to dedicate the resources required to get everything ironed out heading into the midterm elections,” they said.

BTIG reports technology initiatives could be a driver of future gains at Fannie and Freddie. Their oversight agency has made plans to return to exploring the potential of using the joint-venture platform used to unify trading of their MBS as something others could use.

“We envision potentially combining the underwriting resources under a single platform, similar to the enhancements and successful integration made with the common securitization platform,” Hagen said. 

Akwaboah noted that Fannie has been using innovations to improve loan quality during the earnings call.