Fannie Mae reported a net income of $5 billion in the first quarter of 2021, driven primarily by fair value gains. 

This net income increase is up significantly from the first quarter of 2020, when, struggling with restrictions due to COVID-19, the mortgage giant posted a net income of just $500 million. But it is also up from the fourth quarter of 2020’s $4.6 billion in net income. 

The net income increase from the fourth quarter was driven primarily by a shift to fair value gains in the first quarter of 2021 from fair value losses in the fourth quarter of 2020, partially offset by lower credit-related income and lower net interest income. Fair value gains were $784 million in the first quarter of 2021, compared with fair value losses of $880 million in the fourth quarter of 2020. The $1.7 billion shift from fair value losses in the prior quarter to fair value gains in the first quarter of 2021 resulted largely from the company’s implementation of hedge accounting in January 2021.

Fannie Mae earnings

“COVID-19 continues to present challenges and opportunities for homeowners and renters,” Fannie Mae CEO Hugh Frater said. “We had another quarter of near-record mortgage volumes as many took advantage of low rates to refinance or purchase a home. In addition, more than two-thirds of the 1.3 million homeowners with Fannie Mae loans who entered forbearance have since exited, even as we continue to help others find solutions. I’m proud of our steady performance and continuing focus on helping homeowners and renters through uncertain times.”

The majority of Fannie Mae’s business was spent in the refinance market, which is flourishing amid low interest rates. The company acquired 340,000 home purchase loans and 1.1 million refinance loans during the first quarter, which helped homeowners take advantage of low interest rates.

This focus on refinances also lead to a decrease in the company’s net interest income. Net interest income decreased $344 million in the first quarter of 2021 compared with the fourth quarter of 2020 driven primarily by a decrease in net amortization income due to lower levels of single-family mortgage loan prepayment activity in the first quarter of 2021.

Fannie Mae also reported that it initiated more than 1.3 million single-family forbearance plans to help borrowers since the onset of the COVID-19 pandemic. As of March 31, 2021, approximately 920,000 of these loans had exited forbearance, including about 337,000 through reinstatement and another 275,000 through the company’s payment deferral option.

For comparison, Freddie Mac reported its earnings Thursday, announcing its net income of $2.8 billion in the first quarter. It also reported a significant increase from the previous year, driven primarily by new business.

Amid this year’s low interest rate environment and high demand for homes, many of 2020’s top lenders experienced double-digit growth in mortgage originations, with some reporting increases of nearly 350 percent. Several mortgage lenders even joined the list of richest people in the U.S. on Forbes’ billionaires list.

But this year the intensity could slow. Fannie Mae and Freddie Mac released their forecasts earlier this year showing the housing market could be facing a slowdown this year.

Email Kelsey Ramírez

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