Fannie Mae

Good day and welcome to the Fannie Mae Fourth Quarter and Full Year 2021 Financial Results Conference Call. At this time, I will now turn it over to your host, Pete Backell, Fannie Mae's Director of External Communications.

Hello, and thank you all for joining today's conference call to discuss Fannie Mae's Fourth Quarter and Full Year 2021 Financial Results. Please note this call may include forward-looking statements, including statements related to the company's business plans and strategies, including those related to its mission and capital and the impact of those plans and strategies, economic and housing market conditions, and the company's business, loan performance, and financial results. Future events may turn out to be very different from these statements. The risk factors and forward-looking statement sections of the company's 2021 Form 10-K filed today describe factors that may lead to different results. A recording of this call may be posted on the company's website. We ask that you do not record this call for public broadcast and that you do not publish any full transcript. I'd now like to turn the call over to Fannie Mae Chief Executive Officer, Hugh R. Frater, and Fannie Mae Chief Financial Officer, Krissa C. Halle.

Welcome, and thank you for joining us to discuss our 2021 financial results. I'll provide a few opening comments, then Krissa Halle, who I'm very pleased joins me for the first time as our Chief Financial Officer, will speak to the results in more depth. Our 2021 results reflect several important storylines. Some of the key drivers of our earnings were linked to market conditions that were specific to last year and are not likely to last. Other storylines are more fundamental and will shape our work for years to come as we position the company to help address the extraordinary affordability, environmental, and social challenges confronting housing. First, let me call out a few facts specific to last year. 2021 was a strong year for our business as we continue to be a crucial source of mortgage financing in an economy that demonstrated growth following a decline in 2020. We recognized $22.2 billion in net income, nearly 88% higher than the year prior, and we ended the year with $47.4 billion in net worth. We remained significantly undercapitalized compared to our $4 trillion balance sheet. Provided $1.4 trillion in liquidity to the single-family and multifamily markets, enabling the purchase of 1.5 million homes. 451.3 billion of single-family home purchase loans we acquired was the highest dollar volume on record. And I'm pleased to report that nearly 50% of those loans were to first-time homebuyers, also a record for us and squarely aligned with our mission. We also enabled the refinance of 3.3 million loans and funding for approximately 694,000 rental units. Low interest rates, while higher than in 2020, sustained a tailwind for the economy and drove continued demand for home purchase and refinance mortgages. These low interest rates, coupled with strong housing demand and supply constraints, supercharged home price growth. Last year also saw 19% single-family home price growth, the highest annual growth rate in the history of Fannie Mae's Home Price Index. That on top of 10.4% home price growth in 2020. The negative flip side to this price appreciation is that more families have been priced out of the market. In our view, too many homeowners and renters face a market where supply was low, prices were high, and affordable options to buy or rent were scarce. This is making it even harder to close demographic gaps in homeownership and affordability, including gaps related to race or ethnicity. These gaps are closely related to other forms of economic disparity, particularly household wealth gaps between white families and families of color. This dynamic, unfortunately, represents a fundamental persistent challenge in the U.S. housing market. And it underscores the importance of Fannie Mae's ongoing mission, to advance equitable and sustainable access to homeownership and quality affordable rental housing. We are making this mission our first priority for the foreseeable future, just as we are determined to be a global financial services ESG leader, which we see as a natural alignment with our charter and our mission. Through the course of 2021, our mission-first focus yielded important results. In the spring, for example, we launched ReFi Now, to help low-income homeowners take advantage of low interest rates and reduce their monthly house payments. In the summer, we introduced a change to our desktop underwriter system, making it possible to include positive rental payment history into credit assessments, which can help first-time homebuyers, enabling us to see borrowers, including many people of color who, in the past, may not have even applied for a home loan and some of whom end up with lower monthly mortgage payments than what they were successfully paying in rent. Later in the year, we topped $100 billion of green bond issuances. This milestone demonstrates our leadership in supporting the greening of U.S. housing and reducing the sector's carbon footprint. Then, in December, we issued our first-ever Sustainability Accounting Standards Board Report. These are just a few examples of how we delivered on our mission in 2021. As we move into 2022, we are adding to this momentum. Soon, we look forward to publishing our equitable housing finance plan. The societal and economic benefits of affordable, sustainable homeownership and rental housing are well accepted. Homeownership, coupled with a self-amortizing mortgage, has long contributed to wealth creation, especially for middle class families who may not have the opportunity to accumulate assets elsewhere. Unstable, inadequate or substandard housing is closely related to a host of negative long term consequences, including health outcomes and educational attainment. have a broader societal impact. Our equitable housing finance plan is focused on knocking down barriers faced by underserved homeowners and renters across the U.S., with an initial focus on Black homeowners and renters. Putting this plan into action will be a major focus of Fannie Mae in 2022 and beyond. One essential element of our work on housing equity is homebuyer education. In early January 2022, we introduced HomeView. HomeView is a free, online consumer education resource for every step of the homeownership journey. It provides consumers the tools and information to navigate this complex process. We believe it will create better informed, successful homeowners, the kind of homeowners with a bedrock of a safe, sound housing system. Already, more than 16,000 learners have registered on HomeView and more than 12,000 have completed the first-time homebuyer course, earning a certificate of completion that they can share with their lenders. In addition to introducing practical solutions for homeowners and renters, Fannie Mae is also sharing important research on housing affordability, equity, and the growing impact of climate change and natural disasters. In recent months, we've published papers on closing costs for first-time and low-income homebuyers and on potential appraisal bias in refinance transactions. Our research is aimed at deepening our understanding of barriers to housing affordability and equity and spurring conversation about ways that we, as an industry, can knock down those barriers. We'll continue to add to this work in the months to come. We also have a team focused on evidence-based, data-driven climate impacts. Work in this area is a priority for us from a risk management perspective. We want to partner with stakeholders across the public and private spectrum to address both near and longer-term challenges, particularly those at the nexus of racial equity. The foundation for all of our mission work is the safety, soundness, and sustainability of our business. Our 2021 results demonstrate that Fannie Mae continues to focus on safety and soundness. As Crystal will discuss in more detail, Fannie Mae generated strong earnings in 2021. This improves our financial strength and it adds to the overall safety and soundness of the housing finance system. Over the past two years, nearly two-thirds of our single family book of business has turned over. The quality of our new business is high. but the pricing of that business does not reflect the capital requirements of our regulatory rule. One of our most important tools for achieving our mission and ensuring safety and soundness is pricing. In January, for example, we announced price increases on loans for second homes and certain high balance loans. We structured these changes to ensure that they don't adversely affect low and moderate income borrowers. As we move through 2022, we will closely monitor the market and if needed, We will adjust our pricing and other business practices as warranted, balancing, as always, our charter, our mission, and safety and soundness. 2022 will be an important year for housing and for Fannie Mae. We look forward to working closely with FHFA and our housing partners to support the market with a mission-first approach in 2022 and beyond. And now, I'll turn it over to Carissa.