Fannie Mae

Good day and welcome to the Fannie Mae First Quarter 2023 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 First Quarter 2023 Financial Results. Please note this call includes forward-looking statements, including statements about Fannie Mae's expectations related to economic and housing market conditions, their impact on our business and financial results and factors that will affect them, the future performance of the company's book of business, the company's business plans and their impact, and the company's financial results and the factors that will affect them. Future events may turn out to be very different from these statements. The forward-looking statements section in the company's first quarter 2023 Form 10-Q filed today and the risk factors and forward-looking statement sections in the company's 2022 Form 10-K filed on February 14, 2023 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 We ask that you do not record this call for public broadcast and that you do not publish any full transcript.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 Priscilla Almodovar and Fannie Mae Chief Financial Officer Krissa C. Haley.

Welcome and thank you for joining us today. I'll start by spending a few minutes on the current economic environment before turning to our financial and mission performance in the first quarter of 2023. I'll then hand it over to our Chief Financial Officer, Krissa Haley, who will discuss our first quarter results in more detail. Well, it's no surprise that the turmoil in the banking sector during the first quarter added to the existing backdrop of economic uncertainty. Specifically for housing, one impact was a 30-year fixed rate mortgage rate ended the quarter at 6.32%, which was 10 basis points lower than where it began the year, but still 165 basis points higher than mortgage rates the same time last year. Home prices responded to this modest decline and increased 1%, yet home sales continued at their slowest annual pace since 2011. The increase in home prices is evidence that there continues to be significant pent-up demand for housing, despite ongoing affordability constraints. Consumer sentiment echoes these challenges. In fact, in our most recent national housing survey, 79% of consumers responded that it is a bad time to buy a home and renters indicated that high home prices are their primary concern preventing making a home purchase. As to be expected, we continued to see a decline in single family mortgage originations across the market, with an estimated $317 billion in single family originations in the first quarter of this year. This is 21% lower than the market's volumes in the fourth quarter of last year, and less than half of the $781 billion we saw at the same time last year. Reduced volumes constrained lender margins and contributed to the lowest employment levels in the mortgage banking industry since 2020. These trends demonstrate notable market pressures on our lender counterparties, a risk that we are following closely. Overall, I am pleased that during this time of economic uncertainty and volatility, Fannie Mae continued to support qualified buyers, generating strong financial results and stayed focused on effectively managing risk. In doing so, we remained a source of stability and strength to the housing finance system and the broader economy. Now, turning to our first quarter performance. Despite the challenging operating environment, we reported $3.8 billion in net income and $6.8 billion in net revenues. As a result, we were able to continue to build our net worth through retained earnings, which increased to $64 billion as of the end of March. While our quarterly mortgage acquisition volumes were the lowest they've been since 2000, We still provided $78 billion in liquidity to the single family and multifamily markets. In doing so, we helped 306,000 households to buy, refinance, or rent a home. This included approximately 91,000 units of multifamily rental housing, a significant majority of which were affordable to households earning at or below 120% of area median income. We also empowered 80,000 first-time homebuyers to purchase a home. We've been able to generate these strong results and be there for American homeowners and renters because of how we effectively manage the risks of our business. For example, we actively monitor counterparty risk across our many partners, including small and mid-sized banks and non-banks as they respond to the current economic and regulatory environment. We expand access to credit responsibly for the borrowers we serve and for our financial resilience. We actively monitor the credit quality of our existing mortgage book, which today remains sound. And lastly, because of our ability to retain earnings, we maintain significant liquidity. Now, let me turn to our mission. Fannie Mae exists to facilitate equitable and sustainable access to homeownership and quality affordable rental housing across America. As I did in our last call, I'd like to share a few examples of our mission in action. First, we continue to help potential homebuyers benefit from on-time rent payments, which historically have not been included in a borrower's credit score or in the mortgage underwriting process. Our multifamily positive rent payment reporting pilot helps renters build their credit history and improve their credit score by incentivizing property owners to report on time rent payments for their tenants who choose to participate. Since September 2022, I'm proud to say that we've onboarded over 263,000 households, including helping over 8,500 residents establish credit scores. For residents who previously had an existing credit score and saw an improvement, there was an average improvement of 38 points to their score. Importantly, a majority of residents in the program are in census tracts with a minority percentage of more than 50%. Similarly, our single-family positive rent payment history initiative encourages lenders to consider a renter's history of recurring on-time rent payments as part of the eligibility assessment for a home mortgage. Since September, 2021, we've helped lenders qualify nearly 4,000 first-time home buyers for a mortgage using their history of consistent rent payments. Another great example comes out of lessons learned through the use of payment deferrals during the COVID pandemic. In April, we updated our payment deferral options for other hardships. These changes include allowing borrowers who have resolved their financial hardship but are unable to cure their past due payments to defer up to six months of those payments to the end of their loan. We hope that this change will help more borrowers remain in their homes. Finally, based on industry feedback, we updated some of the actions in our Equitable Housing Finance Plan to support historically underserved populations in their housing journeys. Plus, we included new projects that came from our sustainable communities innovation challenge, Fannie Mae's $5 million nationwide competition to identify innovative projects that promote racial equity in housing. To wrap up, I am proud of our quarterly financial results and how we continue to execute on our mission. This is a testament to years of steady transformation at Fannie Mae, our dedicated team members and our industry partners. Fannie Mae remains committed to being a source of stability for the housing finance system and source of strength for homebuyers and renters. We are able to do so because of the changes we've made to improve the resilience of our business, our focus on risk management and strong liquidity. This is what allows us to continue to facilitate affordable, equitable and sustainable access to homeownership and rental housing. Now, I'll turn it over to Krissa to discuss our first quarter financial results.