Inside Mortgage Finance - Fannie Publishes Return on Equity. (It’s Complicated)
Mike SP
In its second-quarter earnings call last month, Fannie Mae released a number that will be key to any future public offering by the enterprise: the company’s return on equity.
CEO Priscilla Almodovar explained that Fannie calculated an “illustrative return on required common equity tier 1” as a way to measure the company’s performance against its peers. “In the second quarter,” she said, “our return on equity was 9.5%.”
For comparison, the average ROE for a regulated utility — the business structure most industry insiders prefer for the enterprises post-conservatorship — is 8% to 12%, although that can vary significantly depending on the firm’s cost of capital.
But that 9.5% figure is complicated. A footnote in Fannie’s second-quarter earnings presentation explains the calculation. It’s based on what the company’s ROE would have been if its actual CET1 capital had been equal to the CET1 amount required for the quarter under the enterprise regulatory capital framework.
For full details, see Inside The GSEs, now available online.
Mike SP
Many GSE Sellers See More Repurchase Demands Withdrawn
Since 2009, more than 7,000 sellers have received a repurchase demand from Fannie Mae or Freddie Mac and nearly 5,300 of them made buybacks. Weichert Financial Services, for example, has bought back $4.12 million of loans since 2013. Yet, as is true for many sellers, Weichert saw significantly more withdrawn demands during that time — $20.82 million. Get a complete picture of buyback history and exposure in IMF’s GSE Repurchase Activity: Cumulative to Fourth Quarter 2024. The report looks at the GSE buyback record lender by lender and year by year, providing details on every lender who has faced a buyback demand from either Fannie or Freddie since 2009. You’ll find out how much they paid, how much of it relates to each vintage of MBS, and how much they got Fannie and Freddie to back down on.Mike SP
The Trump administration recently touted an entity called The Great American Mortgage Corp., suggesting that the company could complete an initial public offering this year. Details on the entity have been scant, though it helped to prompt speculation that the administration plans to merge Fannie Mae and Freddie Mac.
While the administration has still released few concrete details about its plans for the government-sponsored enterprises, Bill Pulte, director of the Federal Housing Finance Agency, posted an ad for The Great American Mortgage Corp. on his X account Monday.
The one-minute video includes a voiceover that states: “Introducing the all new Fannie Mae and Freddie Mac: bigger and better than ever.” The narrator adds: “Revitalizing the American Dream for all Americans. Led by a man who will go down as the greatest housing president in history.” ...
Mike SP
Deliveries to the government-sponsored enterprises declined by 9.7% on a monthly basis in July, according to a new ranking and analysis by Inside The GSEs.
The decline in deliveries to the GSEs was more pronounced for refinances than purchase mortgages. Refi volume fell from $12.01 billion in June to $9.32 billion in July, a 22.4% drop-off. That amounted to 16.3% of new business for the GSEs, a level last seen in September 2024. Purchase-mortgage volume declined by 6.7% to $47.70 billion in July.
United Wholesale Mortgage remained the largest GSE seller, delivering about $6.22 billion in mortgages to Fannie Mae and Freddie Mac in July. That was a 5.8% decline from June.
While GSE business declined in July, volume for the first seven months of the year was up 7.5% on an annual basis.
For more details, see Inside The GSEs.
Mike SP
GSE Purchases of Credit Insurance Down in 2Q
The government-sponsored enterprises purchased a combined $1.58 billion in credit insurance in the second quarter, down from $1.93 billion in the first quarter.
Freddie Mac’s Agency Credit Insurance Structure purchases rose from $367.9 million in the first quarter to $669.1 million in the second, while, Credit Insurance Risk Transfer purchases at Fannie Mae fell from $1.56 billion in the first quarter to $912.1 million in the second.
GSE issuance of credit-risk transfer notes was down to $2.15 billion during the second quarter of 2025, a 22.8% drop from the first quarter. Year-to-date issuance was down 5.1% from the first half of 2024.
Freddie issued a mere $529.0 million in Structured Agency Credit Risk notes in the second quarter, a 59.2% sequential decline in volume. In contrast, Fannie’s issuance of Connecticut Avenue Securities rose to $1.62 billion in the second quarter, up from $1.49 billion in the first quarter.
For full details and exclusive tables, see the latest edition of Inside MBS & ABS, now available online.
Trump Fires Federal Reserve Governor, Accusing Her
of Mortgage Fraud
President Trump late Monday fired Federal Reserve Governor Lisa Cook, accusing her of mortgage fraud and stating in his termination letter that a criminal referral has been filed with the Department of Justice in regard to her alleged behavior.
In a statement, Cook denied legal wrongdoing, saying she would not resign from the Fed. Her attorney Abbe David Lowell said, “President Trump has taken to social media to once again ‘fire by tweet’ and once again his reflex to bully is flawed and his demands lack any proper process, basis or legal authority. We will take whatever actions are needed to prevent his attempted illegal action.”
Trump’s critics view the firing of Cook as another attempt to stack the Fed with members who might be favorable to his policies, in particular rate cuts.
Mike SP
Federal Housing Finance Agency Director Bill Pulte announced on X a second criminal referral of mortgage fraud claims against Federal Reserve Governor Lisa Cook. The FHFA director previously submitted a criminal referral against Cook claiming mortgage fraud on two other properties.
President Trump cited the original claims as cause for termination when he fired Cook last week. Cook has filed a lawsuit against the White House claiming the mortgage fraud allegations are part of an illegal attempt to remove her from her governorship and undermine the independence of the Fed…
Mike SP
Trump Considering Declaring National Housing Emergency
President Trump could declare a national emergency tied to housing as soon as this fall, according to Treasury Secretary Scott Bessent. He disclosed the deliberations Monday in interviews with various news outlets.
The national emergency declaration would allow the administration to use extraordinary powers to address high home prices and limited housing supply.
Bessent didn’t provide many specific details on how the administration would act under a national housing emergency, though he cited potential changes for zoning laws and efforts to reduce closing costs.
The federal government established a national housing emergency in 1946 and 1947, with limitations on non-residential construction and incentives for the construction of rental housing.
Trump Admin Expects High Valuation With GSE IPO
The Trump administration is working toward an initial public offering of stock in Fannie Mae and Freddie Mac, projecting lofty valuations for the government-sponsored enterprises.
Speaking on Fox News in August, Bill Pulte, director of the Federal Housing Finance Agency, said President Trump declined offers of $100 billion to $150 billion for the GSEs during his first term.
“Today, that value is worth anywhere between $500 billion and $700 billion,” Pulte said. “I think it’s going to be a $1 trillion, and potentially even higher.”
Speaking on Fox Business last week, Treasury Secretary Scott Bessent acknowledged that such an enormous transaction would be complex and hinted it could be delayed beyond the end of the year.
For more details, see the new issue of Inside The GSEs.
Mike SP
CFPB Considering Changes to ATR/QM Rule
The Consumer Financial Protection Bureau is considering changes to its ability-to-repay rule and standards for qualified mortgages.
The bureau disclosed potential changes to the rule in its spring 2025 regulatory agenda Thursday.
The CFPB noted that the agency is under interim leadership and is “carefully considering various sources in setting its future priorities.” The CFPB said its regulatory agenda primarily focuses on updating certain projects from the fall 2024 agenda, reconsideration of certain recently completed rulemakings and “limited new additions,” with the ATR/QM rule being one of them.
However, the timeframe for potential action regarding the
ATR rule and QM standards is unclear, listed as “to be determined” in the
long-term agenda. The regulator said it will evaluate further adjustments
to the rule as it continues to monitor market developments, and expects
to have additional information on the rule and other priorities in its
fall regulatory agenda.
UWM Fueling Issuance of Non-Agency MBS
The role United Wholesale Mortgage plays in supplying loans for non-agency mortgage-backed securities is on full display in deals that started marketing Thursday. Two jumbo MBS and an expanded-credit MBS included contributions from UWM.
Annaly Capital Management is marketing a $304.4 million jumbo MBS in which slightly more than half of the collateral was sourced from UWM. And Redwood Trust has a $595.3 million jumbo MBS with UWM as the top contributor, accounting for 10.5% of the dollar volume of the issuance.
Meanwhile, Goldman Sachs is offering a $281.2 million expanded-credit MBS with investment-property mortgages underwritten using debt service coverage ratios. UWM originated 63.1% of the loans in the MBS.
The nonbank delivers its loans to securitization issuers rather than issuing its own MBS. According to Inside Nonconforming Markets, UWM was identified as the lender of $1.31 billion of prime non-agency MBS issued during the second quarter of 2025 along with $526.3 million of expanded-credit MBS.
SideNote
Freddie Mac is marketing a credit risk transfer transaction tied to a pool of loans with an unpaid principal balance of $20.7 billion. It’s the third issuance in the DNA series of CRT transactions from the government-sponsored enterprise this year. The series focuses on mortgages with loan-to-value ratios of up to 80%.
Mike SP
From Inside Mortgage Finance - Today
The big question for all mortgage professionals: Are we in for some
type of mini refi boom? Owners of 3% mortgage servicing rights don’t
have anything to worry about, but what about 6.5% - 7.0% paper that’s
older than six months?... In general, the share prices of several
nonbank mortgage shops were trading up Monday, but none super
dramatically…One thing we’ve been hearing the past two weeks is that
warehouse lenders are starting to get more line-of-credit inquiries from
their nonbank customers. Later this week Inside Mortgage Finance
publishes its ranking of the nation’s top 15 warehouse providers…
Mike SP
Non-US-Citizen Share of Borrowers in Non-Agency MBS Rising
The share of mortgages for non-U.S. citizens in the non-agency mortgage-backed securities market grew from 4.1% in 2021 to 10.4% this year, according to a new analysis by Kroll Bond Rating Agency.
Included in the borrower group of non-U.S. citizens are permanent residents, nonpermanent residents, borrowers that use Individual Tax Identification Numbers and foreign nationals.
Among non-citizen borrowers in non-agency MBS, KBRA said foreign nationals had the highest 180+ day default rate at 4.6%. “While this population is relatively small, the elevated default risk may reflect unique vulnerabilities — such as limited U.S. credit history, foreign income dependency and the non-owner-occupied nature of these loans,” KBRA said of the performance of foreign national borrowers.
Nonpermanent residents had a default rate of 1.3%, ITIN borrowers have “shown virtually no defaults or losses to date,” and permanent residents’ default rate is 1.7%, the same as the default rate for U.S. citizens.
Mike SP
FSOC Shifts Focus to Promote Economic Growth
Under the Trump administration, the Financial Stability Oversight Council will focus on promoting economic growth. Treasury Secretary Scott Bessent announced the priority shift — away from the regulatory emphasis seen during the Biden administration — during a meeting of the FSOC Wednesday.
FSOC was established by the Dodd-Frank Act and largely consists of federal financial regulators.
Bessent said FSOC is focused on economic growth because “regulators too often overlook the threat economic stagnation poses to financial stability.”
“History is replete with examples: the Latin American Debt Crisis of the 1980s; Japan’s ‘Lost Decades;’ and the Eurozone Debt Crisis,” he said. “In each instance, a period of stagnation or depressed growth precipitated financial calamity, including bank failures, currency devaluations and sovereign debt crises.”
FSOC = Financial Stability Oversight Council
Mike SP
Fannie Mae announced Wednesday that Pacific
Investment Management Company
placed the winning bid on the sale of reperforming loans by the government-sponsored
enterprise. The pool had an unpaid principal balance of $559.1 million.
Mike SP
Fannie Mae and Freddie Mac continue to lose share of the residential mortgage market.
In the second quarter, the two secondary market giants accounted for 51.1% of all new mortgage-backed security issuance, according to a new analysis by Inside The GSEs. That marks the lowest market share for the GSEs since the second quarter of 2007.
The decline in market share has been more pronounced at Freddie, which saw its slice of the issuance pie fall from 29.1% in the first quarter to 26.8% in the second even while production rose from $80.89 billion to $89.62 billion over the same period. During that same interval, Fannie’s market share went from 24.9% to 24.3% as deliveries rose briskly from $69.04 billion to $81.26 billion.
The real winner, of course, has been Ginnie Mae.
For full details and exclusive MBS issuance tables, see the new edition of Inside The GSEs, now available online.
Mike SP
Michael Comparato, president of Franklin BSP Realty Trust, is confident that efforts by the Trump administration to reform the government-sponsored enterprises won’t have a negative impact on the housing market.
“What I can say with almost absolute certainty is I do not think this administration — or any administration — is going to do something that’s going to mess with home ownership and the cost of mortgages,” he said Monday during an investor call.
FBRT focuses on multifamily mortgage origination, securitization and servicing.
Comparato conceded that it’s difficult to predict the exact changes the Trump administration will make to Fannie Mae and Freddie Mac. “But I think any outcome is ultimately an acceptable outcome,” he said.
Mike SP
The Trump administration hasn’t yet determined the future of the government-sponsored enterprises, according to Bob Broeksmit, president and CEO of the Mortgage Bankers Association.
“There have been a number of trial balloons floated, but it appears no decisions have been made,” he said Tuesday at a summit hosted by the Mortgage Industry Standards Maintenance Organization.
The administration has convened a number of meetings with stakeholders in recent weeks to consider reforms to Fannie Mae and Freddie Mac. Broeksmit said it’s still not clear how talk of an initial public offering of stock or other potential actions will turn out.
“We don’t even know what to call it, because we don’t know whether it’s release [from federal conservatorship],” he said. “It’s not really an IPO, because we can already buy shares in these companies. Is it reform? Is it release? Is it recapitalization? It’s unclear.”