Federal National Mortgage Association
OTC:FNMA
Federal National Mortgage Association
In 1938, as part of the New Deal efforts to stabilize the U.S. housing market ravaged by the Great Depression, the Federal National Mortgage Association, commonly known as Fannie Mae, was born. The brainchild of President Franklin D. Roosevelt’s administration, Fannie Mae was established to ensure liquidity, stability, and affordability in the mortgage market. It operates by purchasing mortgages from lenders, such as banks and credit unions, thereby freeing up capital for these institutions to offer additional home loans. This model accelerates the turnover of capital within the housing finance system, ensuring a steady flow of mortgage funds. By securitizing these acquired mortgages into mortgage-backed securities (MBS), Fannie Mae offers them to investors, effectively spreading out the risk while providing a return based on the interest rates from the underlying home loans.
This business model, however, is not without its complexities and challenges. Fannie Mae earns revenue by charging fees to guarantee the timely payment of principal and interest on these MBS to investors. Additionally, it profits from the spreads between the costs of acquiring mortgages and the returns on the issued MBS, balancing risk management with return maximization. Despite its government-sponsored roots, Fannie Mae operates with a need for profitability and risk management akin to any private enterprise. Yet, the financial crisis of 2008 exposed vulnerabilities within this model, leading to a federal conservatorship that still looms over its operations today. Through ups and downs, Fannie Mae’s fundamental mission remains intact: to promote access to affordable mortgage financing across the nation, all while navigating a complex market constantly reshaped by economic, regulatory, and environmental pressures.
In 1938, as part of the New Deal efforts to stabilize the U.S. housing market ravaged by the Great Depression, the Federal National Mortgage Association, commonly known as Fannie Mae, was born. The brainchild of President Franklin D. Roosevelt’s administration, Fannie Mae was established to ensure liquidity, stability, and affordability in the mortgage market. It operates by purchasing mortgages from lenders, such as banks and credit unions, thereby freeing up capital for these institutions to offer additional home loans. This model accelerates the turnover of capital within the housing finance system, ensuring a steady flow of mortgage funds. By securitizing these acquired mortgages into mortgage-backed securities (MBS), Fannie Mae offers them to investors, effectively spreading out the risk while providing a return based on the interest rates from the underlying home loans.
This business model, however, is not without its complexities and challenges. Fannie Mae earns revenue by charging fees to guarantee the timely payment of principal and interest on these MBS to investors. Additionally, it profits from the spreads between the costs of acquiring mortgages and the returns on the issued MBS, balancing risk management with return maximization. Despite its government-sponsored roots, Fannie Mae operates with a need for profitability and risk management akin to any private enterprise. Yet, the financial crisis of 2008 exposed vulnerabilities within this model, leading to a federal conservatorship that still looms over its operations today. Through ups and downs, Fannie Mae’s fundamental mission remains intact: to promote access to affordable mortgage financing across the nation, all while navigating a complex market constantly reshaped by economic, regulatory, and environmental pressures.
Net Income: Fannie Mae reported $3.5 billion in net income for Q4 and $14.4 billion for 2025, marking its 14th consecutive year of annual profitability.
Revenue Drivers: Core earnings were powered by guaranty fees, which made up 81% of Q4 net revenues, with net interest income steady at $28.6 billion for the year.
Cost Discipline: The company reduced full-year noninterest expenses by $141 million and administrative expenses by $40 million, thanks to workforce reductions and contract renegotiations.
Delinquencies: Single-family and multifamily delinquencies increased in Q4, mainly due to seasonal factors and ongoing pressure in the multifamily market, with further increases expected in 2026.
Capital & Net Worth: Net worth rose to $109 billion at year-end, and the company continues to build capital, with a fourth quarter illustrative return on required equity of 10.2%.
Multifamily Strength: Multifamily business reached a $535 billion guaranty book, with Q4 net income of $850 million and full-year net income of $2.9 billion, the highest in four years.
Outlook: Management expects ongoing affordability challenges, competition, and potential for higher delinquencies in 2026, but highlights continued focus on cost efficiency and capital strength.
