A visual look at Fannie, Freddie's performance
9:00 AM ET 6/17/13 | Marketwatch
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Federally controlled mortgage giants Fannie Mae FNMA) and Freddie Mac FMCC) exhibit "critical financial weaknesses" in areas such as capital, poorly performing legacy assets, outdated systems and uncertainty over the future, according to a recently released regulator's report.
The charts in this slideshow take a close look at Fannie and Freddie, starting with delinquency rates. The serious delinquency rate among Fannie- and Freddie-backed single-family home loans has trended down since 2009, but remains relatively high, according to a report from the Federal Housing Finance Agency, which regulates the mortgage backers.
For Fannie and Freddie, the serious delinquency rate, which covers loans that were at least 90 days past due or in the foreclosure process, was above 3% in 2012, far higher than pre-crisis rates of less than 1%.
-- Charts and text by Ruth Mantell
While overall delinquency rates remain elevated, certain loan-year cohorts are driving that result. Loans originated in 2007 have far higher delinquency rates than loans originated in more recent years, according to data from Fannie and Freddie.
Fannie and Freddie's purchases have seen a large shift in recent years. In 2005, Fannie and Freddie bought a total of $730 billion of conventional single-family fixed-rate mortgages, about four times the amount of purchased conventional adjustable-rate single-family mortgages. By 2012, that ratio jumped to 27.
While U.S. lawmakers are considering proposals to contract the government's role in the country's housing-finance system, Fannie and Freddie continue to loom large. In 2012 Fannie and Freddie backed 66.5% of all refinance and purchase loans for one-to-four family residential mortgages, including home equity loans and second liens, according to Inside Mortgage Finance, a publication following industry trends. That share is up from 48.5% in 2003.
Critics are raising their voices about the government's treatment of Fannie and Freddie shareholders. Stockholders are suing, looking for "fairness" and a chance to benefit from some of the government sponsored enterprises' growth. As noted in FHFA's report, Fannie and Freddie send their profits to Treasury and can't build capital. Even as Fannie and Freddie's earnings strengthen on the back of a growing housing market, common shareholders aren't seeing the benefits.
Under control of the federal government, Fannie and Freddie's market capitalization were nearly wiped out. However, in recent months investors have traded up the shares, hoping that the GSEs will be able to eventually shed government control. But given their improving financial results, the urgency to approve reform of the GSEs is slipping away, analysts say, noting that some U.S. lawmakers are loathe to give up the payments from Fannie and Freddie that are helping to narrow the deficit.
Speculation about and pressure to move forward with a plan for the GSEs has grown in the last few months, and so have the common and preferred shares of Fannie and Freddie. Over the 12 months ending Thursday, Fannie shares increased more than 600%, while Freddie's logged more than 560%. Meanwhile, the most heavily traded preferred series for Fannie FNMAS) rose almost 250%, while the most heavily traded preferred series for Freddie FMCKJ) rose almost 220%.
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