Fannie Mae reports $3.8B in Q1 profits

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1. Fannie Mae reports $3.8B in Q1 profits

In Q1, Fannie Mae's earnings more than doubled to $3.78 billion, despite a fall in revenues from $7.14 billion in Q4 '22 to $6.85 billion. The drop in revenue was due to falling amortization income as high interest rates resulted in lower prepayment speeds.

Single-family profits rose to $3.13 billion from $1.98 billion in Q4, and its multifamily business rebounded from a $52 million loss in Q4 to a $640 million profit.

The primary driver of profits for Fannie Mae was a significant reduction in the provision for credit losses, which fell to $132 million from $3.28 billion in the prior quarter.

The company also reported that it acquired 170,000 single-family purchase loans in Q1 ‘23, more than 45% of which were for first-time homebuyers. In total, single-family acquisition volume was $67.5 billion, a 21% decrease from $85.3 billion in Q4 ‘22. That $67.5 billion figure represents the smallest quarterly deal volume in 23 years.

2. CHLA supports changes to the CFPB LO Comp rule

The Community Home Lenders of America (CHLA) submitted comments to the CFPB calling for increased flexibility in Loan Originator Compensation (LO Comp) restrictions to benefit consumers while preventing anti-consumer practices.

Specifically, CHLA requested flexibility to:

1. Reduce compensation on HFA loans;

2. Reduce compensation to match a competitor’s offer for a consumer that the loan originator has been assisting;

3. Reduce compensation when a loan originator makes an error.

“The inflexibility of the current LO Comp rule is detrimental to consumers,” said Scott Olson, Executive Director of CHLA. “By requesting additional flexibility from overly strict prohibitions, CHLA is working to reduce the burden on consumers and close anti-consumer loopholes.”

3. More Nuggets

🏠 Home prices are back on the rise as the spring market proves more competitive than expected. (CNBC)

💵 JPMorgan Chase CEO, Jamie Dimon, declares the banking crisis over: ‘For now, everyone can take a deep breath’. (Telegraph)

😎 Money isn’t the only way to pay for a vacation these days. You could just trade — homes. Home swaps are unlocking cheaper summer vacation stays (Axios)

4. First Republic’s jumbo mortgages contributed to collapse

First Republic Bank's strategy of providing jumbo mortgages to affluent individuals in Silicon Valley partly contributed to its collapse. The bank gained a reputation for offering interest-only mortgages at incredibly low rates to borrowers with high incomes and exceptional credit scores. Typically, they didn’t have to start repaying the principal for a decade.

The demand for such loans surged during the pandemic as wealthy buyers sought mortgage deals that would enable them to invest most of their money into higher-return investments.

However, the values of these loans, along with others, decreased significantly when the Federal Reserve increased interest rates. Although this strategy helped First Republic Bank double its assets in just four years, it ultimately contributed to its collapse.

5. State governments urge Biden to scrap LLPA fee changes

Fiscal officers from 27 state governments have written a joint letter to the Biden administration and the Federal Housing Finance Agency (FHFA), urging them to revoke the LLPA fee changes that took effect on May 1.

“Those who make down payments of 20% or more on their homes will pay the highest fees – one of the most backward incentives imaginable,” the letter said. “The increased fees will subsidize higher-risk borrowers by handing out better mortgage rates to people with lower credit ratings who have saved less for a down payment”.

The letter comes after a group of Republican lawmakers in the U.S. House of Representatives, led by Rep. Andy Biggs (R-Ariz.), introduced a bill that seeks to block changes in the LLPA fees.

☀️ See you on Friday!

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