Inside Mort Finance 2
Mike SP
Mortgage leaders speaking Monday at the Mortgage Bankers Association's annual convention in Las Vegas believe that concerns about the government-sponsored enterprises losing their government guarantee may be overstated.
Mark Jones, president at Union Home Mortgage, said during a panel that it would be a very heavy lift from the Trump administration to get the GSEs out of conservatorship. “I think this may just be a nothing burger,” he said.
Jones noted that any proposal to exit conservatorship would require some form of government guarantee to stay in place. He said that a government guarantee, whether explicit or implied, is needed to give the capital markets a sense of stability and ensure mortgage rates don’t go up substantially.
Stanley Middleman, CEO of Freedom Mortgage, added during the panel that the government guarantee would keep a status quo in the market even if the GSEs had an initial public offering. “I think there will be an IPO, but I don’t think it changes much,” he said.
Mike SP
Issuance of green bonds by the government-sponsored enterprises ground to a halt during the third quarter of 2025.
Neither Fannie Mae nor Freddie Mac issued a single green mortgage-backed security. Fannie also avoided issuance in May, bringing its hiatus to four months.
There were no notices on the websites of the Federal Housing Finance Agency or the GSEs saying the program had been closed, though the Trump administration has been critical of such programs.
GSE green bonds are pools of MBS backed by mortgages on single-family properties with lower energy and water usage. Fannie’s green bond issuance started in 2020 and Freddie followed in 2021.
For more details, see the latest edition of Inside MBS & ABS.
Mike SP
Trade groups representing small and mid-sized mortgage lenders this week offered a daring proposal to address the lack of affordable housing: Allow Fannie Mae and Freddie Mac to once again purchase mortgage-backed securities.
In a joint letter addressed to Treasury Secretary Scott Bessent and Federal Housing Finance Agency Director Bill Pulte, the Community Home Lenders of America and the Independent Community Bankers of America pin the affordability crisis, at least in part, on the spreads between MBS rates and 10-year Treasuries.
As of Oct. 17, this spread was a historically wide 222 basis points, the letter says. That’s compared to a normative spread of 140-170 bps. This increase, the trade groups say, is because the buyers of last resort — the Federal Reserve and the government-sponsored enterprises — no longer purchase MBS. This has led to a structural decline in demand.
Allowing Fannie and Freddie to purchase these securities could reduce mortgage rates by 30 bps or more, the lenders say.
For more details on the trade groups’ proposal, see Friday’s issue of Inside The GSEs.
Mike SP
In a surprise announcement Wednesday
afternoon, Fannie Mae revealed that Priscilla Almodovar is no longer CEO
of the government-sponsored enterprise. She was a holdover from the Biden
administration whereas the Federal Housing Finance Agency was quick to
replace Freddie Mac’s CEO near the beginning of the Trump
administration.
The press release announcing
Almodovar’s departure from Fannie didn’t include an explanation of the
move. “Serving as President and CEO of Fannie Mae has been the privilege
of a lifetime,” she said in the release. “I will be eternally grateful to
the entire Fannie Mae family, our many partners and [FHFA] Director
[Bill] Pulte for the opportunity to lead this incredible
organization.”
Fannie Chief Operating Officer Peter
Akwaboah will take over as acting CEO while the board conducts a search
for a permanent replacement for Almodovar. Akwaboah came to the
enterprise a year and half ago after eight years at Morgan Stanley, three
of those as head of technology and operations.
In addition, Fannie announced that Brandon Hamara, a former vice president of Tri Pointe Homes, who recently resigned from the board at Freddie to join the executive team at Fannie, will serve as co-president. The other co-president at Fannie will be John Roscoe, who took over as Fannie’s head of public relations in April and previously served as chief of staff to former FHFA Director Mark Calabria.
Mike SP
The Federal Housing Finance Agency is
exploring ways to allow reductions on loan level price adjustments for
mortgages on second homes and cash-out refinances, an idea suggested by
recently appointed Fannie Mae Director Barry Habib.
Habib told IMFnews Monday morning that five out of
the eight largest loan sellers to Fannie have had conservations with the
government-sponsored enterprise about the concept.
A decision could possibly be made this
week by FHFA Director Bill Pulte, one source familiar with the matter
said.
A recent report from Keefe, Bruyette
& Woods noted, “While reducing LLPAs would reduce mortgage rates, we
think the impact is likely to be limited, mainly because LLPAs are
generally quite modest and higher LLPAs are on lower credit quality loans
that are most likely already being done at the FHA.”
The report added that any reduction in the LLPA would reduce GSE earnings.
FHFA Chief Sees GSE IPO as a Sure Thing. As For When...
Federal Housing Finance Agency Director Bill Pulte recently noted that, while President Trump made the right decision not to take Fannie Mae and Freddie Mac public during his first term, he “is opportunistically evaluating an offering this time around, which could be as early as the end of 2025.”
On his X account, Pulte urged investors to review the GSEs’ Securities and Exchange Commission filings to better understand the risks involved. For his part, Trump made a commercial for the GSEs.
Another development that could accelerate the process was the confirmation earlier this month of Jonathan McKernan as undersecretary for domestic finance at the Department of Treasury. The nomination of McKernan, who served as senior counsel of FHFA under former Director Mark Calabria, was widely supported by mortgage industry participants.
In his new position, McKernan is expected to play a leading role in whatever happens to the GSEs under the Trump administration.
For more details, see Inside The GSEs, now available online.
Mike SP
The specified-pool share of mortgage-backed securities from the government-sponsored enterprises increased during the third quarter of 2025, according to a new analysis by Inside MBS & ABS.
Specified-pool issuance rose 13.7% from the second quarter to $87.57 billion in the third. And the spec-pool share of new issuance edged up from 44.9% to 47.3% in the third quarter.
The growth came from a 21.5% gain at Freddie Mac, while Fannie Mae reported a 5.0% increase.
Florida pools remained the most common story, with a 9.3% share of spec pools, although issuance was down 2.7% from the previous period. Texas pools fell 18.2%.
For more details, see Inside MBS & ABS.
Mike SP
Fannie Mae reported net income of $3.86 billion for the third quarter of 2025, a 16% sequential improvement, though down from $4.04 billion in the same period last year. Net worth at the enterprise grew to $105.5 billion as of the end of September.
Almost all of those third-quarter gains were below the line. Fannie reported a $338 million provision for losses for the July-through-September period. That’s compared to a $946 million provision in the prior quarter.
That $608 million decline was boosted by a $198 million reduction in non-interest expenses, mostly due to debt extinguishment and lower foreclosed property expenses. Those below-the-line improvements were offset by a $191 million decline in fair value gains in the third quarter.
Meanwhile, net revenues rose by $66 million from the second quarter, though they fell by $34 million year over year.
Fannie calculated a third-quarter illustrative return on average required CET1 of 10.3% versus 9.9% in the second quarter.
Mike SP
A Legend rejoins Fannie
David Benson is rejoining Fannie Mae as a senior advisor.
Benson was president of the government-sponsored enterprise
from August 2018 until his retirement in May
2024.
Federal Housing Finance Agency Director Bill Pulte announced the move, calling Benson a “legend.”
Mike SP
Freddie Mac reported $2.77 billion of income for the third quarter of 2025, up 16.2% from the second quarter. The improvement was largely tied to changes in provisions for credit losses...
Mike SP
The volume of mortgages eligible for
sale to the government-sponsored enterprises flowing into prime
non-agency mortgage-backed securities was up 26.4% from the second to the
third quarter, according to a new ranking and analysis by Inside Nonconforming Markets.
Overall, $10.70 billion of prime
non-agency MBS was issued during the third quarter, down 3.1% from the
second quarter. Jumbo volume made up the bulk of loans in prime
non-agency MBS issued in the third quarter, with $7.34 billion flowing
into deals during the period. Still, jumbos flowing into prime non-agency
MBS were down 7.8% from the second to the third quarter.
Pennymac was the top issuer of prime non-agency MBS in the third quarter, contributing $2.34 billion of loans to new issuance. It increased issuance by 28.0% from the second quarter to the third quarter.
JPMorgan Chase ranked second with $1.99
billion in loans flowing into prime non-agency MBS during the third
quarter, down 0.5%. United Wholesale Mortgage’s prime non-agency MBS
contribution rose 52.0% on a sequential basis to $1.99 billion,
essentially matching Chase. Many of UWM’s loans flow into MBS issued by Chase.
For more details, see the new issue of Inside Nonconforming Markets.
Mike SP
GSE Portfolios Increase to Level Last Seen in 2021
The government-sponsored enterprises’ combined holdings rose from $181.36 billion in the second quarter of 2025 to $215.20 billion in the third, the highest they’ve been since the end of 2021 at the tail-end of the pandemic refinance boom, according to a new analysis by Inside MBS & ABS.
Holdings of both mortgage-backed securities and mortgages increased during the third quarter.
MBS holdings rose 26.5% during the quarter to $73.50 billion at the end of September, also the highest level since the end of 2021. The whole-loan portfolios increased a more modest 15.0% to $141.70 billion.
In the third quarter, Freddie Mac increased its holdings of whole loans by 23.1% to $84.63 billion. Its MBS holdings, on the other hand, rose just 14.3% to $31.80 billion. The balance of those increases flipped at Fannie Mae, where whole loans rose just 4.7% to $57.07 billion while MBS holding spiked 37.7% to $41.71 billion. - For more details, see Inside MBS & ABS.
FHFA Considers Reducing LLPAs for Certain GSE
Mortgages
The Federal Housing Finance Agency is looking at ways to lower loan level price adjustments at the government-sponsored enterprises for mortgages on second homes and cash-out refinances.
The concept of reducing Fannie Mae/Freddie Mac LLPAs is being pushed by Barry Habib, a principal in MBS Highway, who was named to Fannie’s board this summer.
Habib told Inside Mortgage Finance that five of the eight largest sellers of mortgages to Fannie have had conversations with the GSE about the concept.
A report from Keefe, Bruyette & Woods last week noted, “LLPAs are generally modest, but can be meaningfully higher for certain loan types and for weaker credit quality borrowers.” - For more details, see Inside Mortgage Finance.
Mike SP
GSE Changes To Please LLenders.
GSEs Add Options to Selling Guides
Fannie Mae and Freddie Mac announced several changes to their selling guides Wednesday that should please lenders.
A Fannie update provides lenders with relief from representation and warranties related to borrowers’ undisclosed non-mortgage debt. This guidance applies to certain loans underwritten through Desktop Underwriter.
Under the updated guidance, when a final DU submission gets an “approve/eligible” recommendation, DU will alert the lender that the loan qualifies for enforcement of rep-and-warrant relief. That means Fannie will not seek to enforce those reps and warrants for any debts incurred on or prior to closing.
Lenders must still meet all post-closing quality control requirements to verify the accuracy of the information used to support underwriting.
To support its duty-to-serve requirements and affordable housing mission, Freddie announced that, for mortgages secured by manufactured homes, the property may include an accessory dwelling unit. However, that only applies if the primary dwelling is a multiwide.
For more details on the GSEs' guide updates, see Inside The GSEs later this week.