Reviewing Fannie Mae's 2024 Results of Operations

Consistent Profitability Sets Stage for 2026 Conservatorship Recap/Release

Fannie Mae reported its financial results for 2024 recently, and consistent profitability is the headline news. The principal reason for this consistent profitability is the massive recurring amount of guaranty fees paid to Fannie Mae on its over $4 trillion dollar book of business, irrespective of US housing market growth.

This stable profitable operation would be very attractive to institutional investors in connection with stock offerings comprising part of any GSE recap/release.

So the GSEs are an investment story of Jekyll and Hyde.

On the Hyde hand, there is a high degree of “event” risk for a Fannie Mae shareholder, insofar as there can be no assurance that a GSE recap/release (the anticipated “event”) will be consummated. Moreover for common shareholders, there is the additional risk that Treasury will convert rather than cancel its senior preferred stock interest (SPS).

On the Jekyll hand, the “financial” risk posed by an investment in the GSEs, should a recap/release be consummated, is, by comparison to “event” risk, far less consequential given the GSEs’ recent consistent level of profitability.

Below the paywall, I highlight why Fannie Mae’s earnings are consistently profitable.