Fannie Mae (OTCMKTS:FNMA) reported fourth-quarter net income of $3.5 billion and full-year 2025 net income of $14.4 billion, ending the year with $109 billion in net worth, according to management’s prepared remarks on the company’s fourth-quarter and full-year 2025 financial results webcast.
Acting Chief Executive Officer and Chief Operating Officer Peter Akwaboah said the results marked the company’s 14th consecutive year of annual profitability and highlighted continued progress toward a stronger capital position. He also pointed to operational efforts in 2025 that included disciplined expense management, simplification of processes and technology infrastructure, and delivery of tools aimed at improving loan quality, strengthening fraud detection, and enhancing quality control.
Quarterly results driven by core guarantee business
Halley said fourth-quarter net income declined 9% compared with the prior quarter, citing fair value losses that “flipped from gains” in the third quarter, lower investment gains, and higher administrative expenses. She said the majority of fair value losses were driven by compression in interest rate spreads that are not covered by hedge accounting.
Guarantee fees were stable quarter-over-quarter at $5.9 billion, Halley said. She added that the administrative expense ratio was 12.6% in the quarter, up from the prior quarter due to personnel actions, consulting, and other administrative costs, but management expects it will improve in future quarters.
Halley also referenced an “illustrative return on a required equity” measure, calculated using annualized year-to-date net income divided by the company’s average Common Equity Tier 1 (CET1) capital requirement. The fourth-quarter and full-year illustrative return was 10.2%, she said.
Full-year net income down as credit provision and fair value gains shifted
For 2025, Halley said Fannie Mae generated strong and stable revenues, including higher guarantee fees as the single-family book “slowly turns over at higher fees” and the multifamily book grows. She said non-interest expense declined by $141 million year over year as the company began realizing benefits from cost-reduction efforts and operational efficiency initiatives.
However, Halley said the company built its allowance in 2025, recording a provision for credit losses compared with a benefit in 2024. She also said fair value gains were lower than in 2024, when there were larger impacts from fair value changes not covered by hedge accounting, including gains in trading securities moving closer to maturity and gains from changes in interest rate spreads. The shift to a credit-loss provision and lower fair value gains contributed to a 15% decrease in net income compared with the prior year, she said.
Halley said the company’s average guarantee book has remained above $4 trillion since 2022, despite lower refinancing volumes amid higher mortgage rates. Net interest income was $28.6 billion for the year, which included a $305 million increase in guarantee fees and a $708 million decrease in portfolio income driven by higher debt expense as the company replaced maturing, lower-coupon debt.
Halley said net interest margin was 66.5 basis points in 2025, down from 2021 and 2022, when it was elevated due to higher single-family refinance volumes.
Credit performance: delinquencies rose; multifamily challenges cited
Halley said single-family seriously delinquent loans increased by 4 basis points in the fourth quarter, primarily due to seasonal factors and an increase in forbearance related to the government shutdown.
In multifamily, seriously delinquent loans increased 6 basis points in the quarter. Halley attributed the increase to “accumulated pressure on properties” following sustained market challenges, combined with recent softness in rent and net operating income growth. She said Fannie Mae believes multifamily delinquency levels could increase in 2026 based on those ongoing challenges.
On the allowance for credit losses, Halley said the company built its single-family allowance by $208 million during the quarter, driven by new purchase acquisitions—which she said tend to have a higher allowance rate than refinance loans—along with increased delinquencies. The company reduced its multifamily allowance by $93 million, citing stabilized property values and charged-off loans exceeding the allowance for new acquisitions.
Costs, capital, and balance sheet actions
Halley said fourth-quarter administrative expenses rose $102 million from the prior quarter due to personnel costs and seasonal factors. For the full year, she said administrative expense fell by $40 million and total non-interest expense declined by $141 million versus 2024.
The year-over-year decline in administrative expense was driven primarily by workforce reductions of approximately 1,200 employees, scaling back contractors, and renegotiating key contracts, Halley said. She added that 2025 included a $95 million increase in severance and a $55 million increase in occupancy expense, partially related to reducing the company’s real estate footprint. The administrative expense ratio improved to 12.36% in 2025 from 12.45% in 2024, she said.
On capital, Halley said CET1 capital requirements were stable quarter-over-quarter, while total risk-weighted assets increased 3% and risk density rose to 31.9%. She attributed the changes to higher credit risk weights on new acquisitions and reduced capital relief from credit risk transfer (CRT) runoff. Halley said Fannie Mae continues to use CRT to manage regulatory capital and has enhanced its CRT program in recent years to increase effectiveness and reduce premiums and deal costs. She also noted that more than 55% of total CET1 capital requirements were driven by stress capital and stability capital buffer requirements.
Halley said the company has continued building net worth and progressing toward capital requirements, increasing net worth by $95.5 billion since January 2020, including $48.7 billion since it began reporting its capital position under the enterprise regulatory capital framework in the fourth quarter of 2022.
Single-family competition and multifamily growth
Akwaboah said Fannie Mae provided $409 billion of liquidity to the mortgage market in 2025, helping approximately 1.5 million households, including 704,000 home buyers—more than half of whom were first-time buyers.
In the single-family business, Halley said the segment delivered $2.7 billion in net income in the fourth quarter amid affordability challenges and strong competition. She said a decline in mortgage rates late in the third quarter contributed to a $19 billion increase in fourth-quarter refinance acquisition volumes. However, she said competitive dynamics—including the impact of capital requirements on pricing—compressed the company’s share of new business and made it difficult to fully replace loan runoff with new acquisitions, and she said those factors could persist in 2026.
Halley said the single-family book continues to turn over at higher guarantee fees, with fourth-quarter average guarantee fees on new acquisitions 6.7 basis points higher than the average guarantee fee on the total single-family guarantee book. She said the credit profile of single-family acquisitions remained strong in 2025, with key metrics trending consistently versus recent years.
In multifamily, Halley said Fannie Mae priced competitively through 2025 to grow the guarantee book to $535 billion at year-end, up $35 billion year over year. The larger book contributed to fourth-quarter net income of $850 million and full-year net income of $2.9 billion, the highest level in four years, she said.
Halley said multifamily business volume increased 38% quarter-over-quarter in the fourth quarter, bringing full-year volume to $73.7 billion, the highest acquisition volume in five years. She added that credit metrics for the multifamily book remained roughly in line with 2024, and said the share of the book with a current debt service coverage ratio below one was about 4% at year-end 2025, down from 6% at year-end 2024. Halley also said nearly all of the multifamily guarantee book had some form of credit protection at year-end due to the DUS risk-sharing model and CRT programs.
Finally, Halley said the company is managing its balance sheet as net worth increases, noting that 2025 funding needs were primarily satisfied through retained earnings rather than new debt issuance. She said the retained mortgage portfolio ended the year at $132.5 billion and that Fannie Mae increased holdings of agency mortgage-backed securities to achieve higher returns and support market and lender liquidity, with plans to continue investing in agency MBS while remaining in compliance with portfolio limits and managing interest rate risk.
In closing, management said the core guarantee business remains a durable foundation for revenues, the company has been effective in building capital through retained earnings, and cost reductions and operating effectiveness initiatives are expected to continue shaping its approach in 2026.
About Fannie Mae (OTCMKTS:FNMA)
The Federal National Mortgage Association, commonly known as Fannie Mae (OTCMKTS:FNMA), is a government-sponsored enterprise established by Congress in 1938 as part of the New Deal to support the U.S. housing market. Headquartered in Washington, DC, Fannie Mae’s mission is to promote liquidity, stability and affordability in the mortgage market. The company operates by purchasing residential mortgage loans from financial institutions, pooling them into mortgage-backed securities (MBS), and providing guarantees to investors against borrower default.
In its core business, Fannie Mae works with mortgage lenders across the United States—including banks, credit unions and mortgage finance companies—to ensure a steady flow of capital for homebuyers and homeowners seeking refinancing.
