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Mortgage Giants Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac are building their net worths on strong revenue and profits, signaling positive outcomes for the Trump administration’s plans to release the companies from government conservatorship. However, Treasury Secretary Scott Bessent stated that other priorities take precedence, and any privatization plan should not lead to higher mortgage rates for consumers.
Experts caution that the Trump administration may limit support for riskier borrowers provided by Fannie and Freddie. Placed in government conservatorship in 2008 during the Great Recession, the mortgage giants have reported significant profits, boosting their total net worths to over $150 billion.
Fannie Mae’s Financials
Fannie Mae reported a significant increase in provisions for credit losses due to suspected fraud affecting multifamily loans. Despite this, the multifamily business remains profitable, contributing to a fraction of the company’s revenue. Most of Fannie Mae’s profits come from its single-family mortgage guarantee business, supporting numerous home mortgages in 2024.
Freddie Mac’s Success
Freddie Mac also reported substantial profits, particularly from its single-family business. Surpassing Fannie Mae in backing home loans in 2024, Freddie Mac continues to thrive in the mortgage industry. The company’s ability to attract investors through mortgage-backed securities remains strong.
Both Fannie and Freddie play a crucial role in the housing market by packaging mortgages into securities deemed safe investments for investors. Even in challenging economic times, the mortgage giants ensure that investors receive their payments. In the housing market, Freddie Mac purchased loans for cash and issued MBS totaling over $411 billion last year, a significant increase from 2023. This allowed nearly 1.6 million families to buy, refinance, or rent a home. The combined net worth of mortgage giants reached $154.3 billion, with Fannie Mae’s net worth growing by 22 percent to $94.7 billion and Freddie Mac’s net worth increasing by 25 percent to $59.6 billion in 2024. The Federal Housing Finance Agency estimated that the mortgage giants would need a minimum of $319 billion in adjusted total capital to withstand a major housing downturn. President Trump initiated the process of privatizing the mortgage giants, but the release of Fannie and Freddie from government conservatorship is currently postponed due to other financial priorities. There is ongoing debate over whether mortgage markets should be completely privatized or if the government should continue to provide support. The National Association of Realtors and other real estate groups advocate for government involvement in secondary mortgage markets. Before releasing Fannie and Freddie from conservatorship, the potential impact on long-term mortgage rates is a key consideration. With rising home prices, Fannie and Freddie can support larger mortgages, including loans up to $1.2 million in high-cost markets. Despite this, they still cater to first-time homebuyers, with Freddie Mac assisting 426,000 first-time buyers in 2024 and Fannie Mae helping 391,000 renters become homeowners. Housing affordability remains a challenge for many consumers. According to our calculations, between 2010 and 2023, median home prices saw an increase of approximately 102 percent, while incomes only rose by about 64 percent. Fannie Mae is dedicated to collaborating with housing partners to address the issue of affordability, especially for consumers with limited credit histories and those encountering high initial costs.
The previous Trump administration had intended to restrict Fannie and Freddie’s acquisitions of “high-risk” single-family loans to 6 percent of their purchase mortgage volume and 3 percent of refinancings. High risk was defined as a mortgage meeting two out of three criteria: a down payment of less than 10 percent, a debt-to-income ratio above 45 percent, or a borrower credit score below 680.
The proposed limits on high-risk loans were removed by the Biden administration. Since then, the share of Fannie and Freddie-backed purchase loans in 2023 that would have been classified as risky has surpassed 10 percent at times during 2023 and 2024, as per an Urban Institute analysis.
Fannie Mae’s CFO, Chryssa Halley, stated that the credit profile of single-family mortgages backed by Fannie Mae remains robust, with average loan-to-value ratios of 50 percent and an average credit score at origination of 753. Despite acquiring $55 billion in multifamily loans in 2024, Fannie Mae transferred a portion of the credit risk on $26 billion of those loans to other entities.
Overall, Fannie and Freddie provided guarantees on $6.72 trillion in single-family mortgages by the end of 2024. This figure has remained relatively stable since 2022, when increasing mortgage rates slowed down home sales and refinancing activities. Fannie and Freddie collectively employ over 16,000 individuals, with a majority based in the Washington, D.C. metropolitan area.
As of January 31, Freddie Mac had 8,076 full-time employees, a slight increase from 8,004 in 2023. Fannie Mae reported approximately 8,200 employees as of December 2024, up from 8,100 at the end of 2023.