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Mortgage giants Fannie Mae and Freddie Mac continue to build their net worths on strong revenue and profits, boding well for the Trump administration’s desire to release the companies from government conservatorship.
But incoming Treasury Secretary Scott Bessent said the Trump administration has other priorities for now, and that any plan for privatizing Fannie and Freddie shouldn’t result in consumers paying higher mortgage rates.
In the meantime, some housing finance experts warn that the Trump administration may impose limits on how much support the mortgage giants can provide to riskier borrowers.
Fannie and Freddie were placed in government conservatorship in 2008 as mortgage delinquencies and foreclosures climbed during the Great Recession of 2007-09.
The mortgage giants have come a long way since then, this week reporting combined 2024 profits of $28.9 billion that helped boost their total net worths to more than $150 billion.
Fannie Mae disclosed in its annual report to investors Friday that it’s upped provisions for credit losses by $257 million this year, to $752 million, due to fraud or suspected fraud that could affect the performance of multifamily loans it guarantees.
But the backing Fannie provides for apartment buildings accounted for only a fraction (16 percent) of the company’s $29 billion in 2024 revenue, and the multifamily business remains profitable, generating $2.5 billion in net income.
Most of Fannie Mae’s $17 billion in 2024 profits (85 percent) came from its single-family mortgage guarantee business, which backed $326 billion in home mortgages last year. That includes 778,000 purchase loans totaling $270 billion, and 204,000 refinancings totaling $56 billion.
Priscilla Almodovar
“In 2024, we grew our net worth to nearly $95 billion, continued to build our regulatory capital, and carried out our mission,” Fannie Mae CEO Priscilla Almodovar said in a statement. “Our strong results were driven by guaranty fee income, consistent with the transformation of our business model that began well over a decade ago.”
The story was much the same at Freddie Mac, which in the past has also alerted investors to potentially fraudulent loans in its multifamily business.
The lion’s share (79 percent) of Freddie Mac’s $11.9 billion in 2024 profits came from its single-family business. Although Fannie Mae has traditionally been the bigger company, Freddie Mac surpassed its rival in backing $346 billion in home loans in 2024, including 820,000 purchase mortgages totalling $286 billion and 209,000 refinancings totaling $60 billion.
Freddie Mac takes the lead in purchase mortgage volume
Source: Fannie Mae and Freddie Mac earnings reports.
Fannie and Freddie don’t make loans themselves but package up mortgages that meet their standards into mortgage-backed securities (MBS) that are sold to investors.
MBS backed by Fannie and Freddie are seen as safe investments by investors because even if homeowners stop making their payments, the mortgage giants make sure investors still get paid.
Jim Whitlinger
“Last year alone, Freddie Mac acquired more than 1 million loans from over 1,000 lenders of all sizes across the country,” Freddie Mac Chief Financial Officer Jim Whitlinger said on a call with investment analysts. “We packaged those loans into mortgage-backed securities, or MBS, that attracted investors from around the world to support U.S. housing.”
Last year, Freddie Mac purchased loans for cash and issued MBS totaling more than $411 billion, up 18 percent from 2023, and the “proceeds enabled Freddie Mac to help nearly 1.6 million families buy, refinance, or rent a home,” Whitlinger said.
Mortgage giants’ combined net worth hits $154.3 billion
Source: Fannie Mae and Freddie Mac earnings reports.
Since repaying a $191 billion taxpayer bailout, Fannie and Freddie have been gradually building their net worths, aided by the first Trump administration’s decision to allow both companies to keep all of their earnings.
Fannie Mae’s net worth grew by 22 percent in 2024, to $94.7 billion, while Freddie Mac bolstered its net worth by 25 percent, to $59.6 billion.
Fannie and Freddie’s federal regulator, the Federal Housing Finance Agency, has estimated the mortgage giants would need a combined minimum of $319 billion in adjusted total capital to weather another big housing downturn.
Fannie and Freddie’s capital positions, “are improved from 2008, but are not robust enough to prevent a Treasury draw in the event of a large loss,” according to the FHFA’s annual report to Congress in June.
President Trump started the complex and politically fraught process of privatizing the mortgage giants during his first administration, and his allies were reportedly working on getting the ball rolling again even before winning reelection in November.
Scott Bessent
Last week, Treasury Secretary Scott Bessent told Bloomberg’s Saleha Mohsin that with Trump’s 2017 tax cuts set to expire this year and a debt ceiling deadline looming in March, releasing Fannie and Freddie from government conservatorship is on the back burner.
“Right now, the priority is tax policy,” Bessent said. “Once we get through that, then we will think about the priority for Fannie and Freddie release.”
Many Democrats and Republicans agree that Fannie and Freddie no longer need to be in conservatorship. But there are considerable differences over whether mortgage markets should be completely privatized — which could drive up mortgage rates — or if the government should continue to provide some kind of backstop.
The National Association of Realtors and other real estate industry groups have advocated that the government continue to play a role in secondary mortgage markets. NAR has proposed that Fannie and Freddie could be replaced by a new private entity that’s regulated like a public utility.
Bessent said the most important metric he’s looking at before releasing Fannie and Freddie from conservatorship “is any study or hint that mortgage rates would go up. Anything that is done around a safe and sound release is going to hinge on the effect on long-term mortgage rates.”
Baseline conforming loan limit, 2000-2025
Source: Federal Housing Finance Agency
Rising home prices mean Fannie and Freddie can buy bigger and bigger mortgages — the conforming loan limit for single-family homes in most markets is now $806,500, and the mortgage giants can now back loans of up to $1.2 million in high-cost markets.
But Fannie and Freddie still do approximately half of their business with first-time homebuyers, as qualifying borrowers can put down as little as 3 percent when purchasing a home (buyers making down payments of less than 20 percent are required to take out private mortgage insurance at their own expense).
Freddie Mac backed purchase mortgages for 426,000 first-time homebuyers in 2024, while Fannie Mae helped 391,000 renters become homeowners.
“Housing affordability is tough for many consumers,” Almodovar said on a call with investment analysts. “By our estimates, from 2010 – 2023, median home prices rose about 102 percent, but incomes only rose about 64 percent.”
While Fannie Mae doesn’t control “many of the factors impacting affordability, we are committed to working with our partners in housing to tackle this challenge,” Almodovar said, by helping consumers with limited credit histories and those facing high up-front costs.
The first Trump administration had planned to limit Fannie and Freddie’s purchases of “high-risk” single-family loans to 6 percent of their purchase mortgage volume and 3 percent of refinancings.
High risk was defined as any mortgage with two of the following three factors: A down payment of less than 10 percent, a debt-to-income ratio above 45 percent, or a borrower credit score below 680.
Share of ‘high risk’ purchase loans backed by Fannie and Freddie
The proposed limits on high-risk loans were rescinded by the Biden administration, and since then the share of purchase loans backed by Fannie and Freddie in 2023 that would have been defined as risky has climbed above 10 percent at times during 2023 and 2024, according to an Urban Institute analysis.
“Many expect the incoming administration to consider reimposing the caps on high-risk, second-home, and investor property loans, but we believe doing so would constrain access to credit in a counterproductive manner, making homebuying more difficult,” Urban Institute researchers Laurie Goodman and John Walsh said in December.
Chryssa Halley
Fannie Mae CFO Chryssa Halley said Friday the credit profile of single-family mortgages backed by Fannie Mae remains strong, with average loan-to-value ratios of 50 percent and average credit score at origination of 753.
On a call with investment analysts, Halley acknowledged that “multifamily lending transactions involving fraud or suspected fraud further heightened the risk of default and added to our multifamily credit loss provision.”
While Fannie Mae acquired $55 billion in multifamily loans in 2024, it transferred a portion of the credit risk on $26 billion of those loans to other companies, and that “essentially all of our multifamily book had some form of credit enhancement.”
Single-family mortgages backed by Fannie and Freddie
Source: Fannie Mae and Freddie Mac earnings reports.
All told, Fannie and Freddie provided guarantees on $6.72 trillion in single-family mortgages at the end of 2024 — a figure that’s remained fairly constant since 2022, when rising mortgage rates slowed the pace of home sales and mortgage refinancing.
Together, Fannie and Freddie employ more than 16,000 workers, the majority in the Washington, D.C. metro area.
As of Jan. 31, Freddie Mac had 8,076 full-time employees, up slightly from 8.004 at the same point in 2023. Fannie Mae reported that it had about 8,200 employees as of December 2024, up from 8,100 at the end of 2023.
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