Fannie Mae

Good day and welcome to the Fannie Mae Second 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 Second 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, the future performance of the company and its book of business, and the company's business plans and their impact. Future events may turn out to be very different from these statements. The forward-looking statements section in the company's second quarter 2023 Form 10-Q filed today and the risk factors and forward-looking statements 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 We ask that you do not record this call for public broadcast and that you do not publish any full transcript.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. Let me begin by spending a few minutes on the economic environment before turning to our performance in the second quarter of 2023. After that, our Chief Financial Officer, Krissa Haley, will discuss our second quarter results and current outlook for the economy. Economic data was mixed in the second quarter, though GDP growth was stronger than anticipated. The Federal Reserve continued tightening monetary policy and raised their target Fed funds rate twice in the past few months. One of the focal points in their decision-making has been how much housing contributes to inflation. And while overall inflation has slowed, housing's contribution to inflation has remained elevated. The resiliency of the housing market continued to surprise many of us, especially since mortgage rates and high home prices continue to weigh on housing affordability. The lack of housing supply is a major contributing factor. Many current homeowners are reluctant to sell their existing homes and give up their low mortgage rates they locked in in 2020 or 2021. Earlier this month, the National Association of Realtors reported that there were 1.08 million existing homes for sale last month, compared with 1.92 million in June 2019. This lack of existing home supply drove stronger than expected home price growth. In fact, we estimate that single-family home prices rose about 5% during the first six months of the year, while many of us were anticipating a decline. Single-family mortgage origination volumes in the overall market were about 35% lower than the same time last year, despite the estimated $120 billion increase quarter on quarter due to the typical spring home buying season. It continues to be a tough market for our lender counterparties, something we are monitoring closely. Thanks to the dedication of our leadership and teams across the company, we continued to support an unprecedented housing market while generating strong financial results and effectively managing risk. Now turning to our second quarter financial performance, the strength in home prices during the quarter had a direct impact on our earnings, largely due to the decrease in our single family allowance that Krista will talk about. We reported $5 billion in net income and $7.1 billion in net revenues. As a result, through retained earnings, we continue to build our net worth, which reached $69 billion as of the end of June. I'm proud that through our efforts, we provided $104 billion of liquidity to the single family and multifamily markets. In doing so, we helped borrowers obtain mortgage credit for approximately 420,000 home purchases, refinances, and rental units. This included approximately 139,000 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 helped 108,000 first-time homebuyers purchase a home. Despite challenges with housing affordability and supply, consumers' homeownership aspirations remain high. And while Fannie Mae cannot directly control these factors, We are working to help address housing challenges consumers face, especially those that disproportionately burden underserved renters and homeowners. And we're doing so safely and soundly. Let me touch on a few examples. First, we advance our mortgage pricing model. The new construct improves support for traditionally underserved borrowers while further aligning our pricing model to our capital requirements. Second, we continued to support special purpose credit programs, currently active in six markets, that are expected to make loan qualification easier for underserved borrowers. And third, we introduced a new option for lenders to verify a property's market value and eligibility as part of our journey to make the home valuation process more effective, efficient, and unbiased. Now, our role is not just about helping consumers get into a home. It is also about ensuring they remain stably housed. Housing stability is key to well-being for both individuals and communities. On that note, I'm gratified that as of the end of June, we stood at less than 100,000 seriously delinquent single-family loans, coming a long way from the over 1 million seriously delinquent loans we saw in our single-family book in February of 2010. In addition to market factors, this is a testament to the enhanced underwriting policies, servicing options, and support we give to lenders and borrowers. This includes things like free counseling assistance to borrowers and renters impacted by natural disasters and free foreclosure prevention assistance to borrowers in distress. We remain focused on continuing to support renters and homeowners as they face the uncertainties of the current market. You know, this fall marks 15 years since Fannie Mae was placed in conservatorship. A lot has changed since that time. Today, Fannie Mae has been transformed. Fannie Mae is safer and stronger thanks to years of work to improve the resiliency of our business and our steadfast focus on strong risk management. Because of this, we continue to be a stabilizing force in the market and to deliver on our mission. like we did through the COVID-19 pandemic and how we're doing now through this challenging economic cycle. We are committed to being a reliable source of liquidity and stability to the housing finance system in the United States. Now I'll turn it over to Krissa to discuss our second quarter financial results.