Fannie Mae First Quarter 2026 Financial Results Webcast

Fannie Mae Moderator:
Good day, and welcome to the Fannie Mae First Quarter 2026 Financial Results Webcast. At this time, I will now turn it over to your host, Terence O'Hara, Fannie Mae's Director of Enterprise Communications.

Terence O'Hara:
Hello, and thank you for joining today's webcast to discuss Fannie Mae's first quarter 2026 financial results. Please note this webcast includes forward-looking statements, including expectations related to housing market, economic, and competitive conditions and their impact; the future performance and credit characteristics of the company's book of business; the company's future financial performance; and the company's future plans and their impact. Future events may turn out to be very different from these statements.

Factors that may lead to different results are identified in the "Forward-Looking Statements" section of the company's First Quarter 2026 Form 10-Q, filed today, and the "Forward-Looking Statements" and "Risk Factors" sections of the company's 2025 Form 10-K, filed February 11, 2026.

A recording of this webcast may be posted on the company's website. We ask that you do not record this webcast for public broadcast, and that you do not publish any full transcript.

I'd now like to turn the call over to Fannie Mae's Acting Chief Executive Officer and Chief Operating Officer, Peter Akwaboah, who will be followed by Fannie Mae Chief Financial Officer Chryssa C. Halley.

Peter Akwaboah:
Good morning, and thank you for joining us today.

1Q 2026 Key Highlights
We opened the year strong, posting first quarter net income of $3.7 billion, up 5% quarter-over-quarter and up 2% year-over-year, with stable net revenues of $7.3 billion. This performance drove our net worth to $112.7 billion and reflects the sustained health of our guaranty business, the discipline of our execution, and the strength of our balance sheet.

At Fannie Mae, our mission guides how we operate, which is especially important today as the macroeconomic environment is adding uncertainty to an already challenging housing market. We are closely monitoring these dynamics and are confident in our ability to operate efficiently and respond as conditions evolve. We remain focused on providing uninterrupted liquidity in all economic cycles to support stability and affordability to the U.S. housing market.

We made solid progress on our key priorities. We built on the operational efficiency progress we outlined last quarter. Our expense management efforts helped drive stronger results, including lower administrative expenses this quarter. We maintained support of the secondary mortgage market through increased MBS purchases. And we delivered targeted process and technology updates to address industry pain points, expand access, and strengthen our role as a preferred business partner. And since quarter end, we enabled two new credit score models, including immediate use of VantageScore 4.0, to support affordability and access through industry innovation and competition.

Together, these actions enable us to deliver on our mission. During the first quarter, we provided $116 billion of liquidity, helping approximately 385,000 households to buy, refinance, or rent a home. We also assisted borrowers through foreclosure prevention solutions, allowing more than 24,000 homeowners to remain in their homes, highlighting how our role extends beyond housing access.

We are proud of the positive impacts we are making for households across America. With that, I'll turn it over to Chryssa Halley, our Chief Financial Officer, to walk through our financial results.

Chryssa C. Halley:
Thank you, Peter, and good morning, everyone.

Before discussing our first quarter financial results, I want to briefly address the economic and market environment. Although the markets experienced increased volatility towards the end of the quarter, these developments did not materially impact our first quarter results, and we are closely monitoring factors that could influence the credit performance of our guaranty book. We believe our strong credit profile, $112.7 billion in net worth, and risk management capabilities position us to manage through periods of increased uncertainty.

1Q 2026 Financial Summary
Turning to our first quarter performance on page 2 of the earnings presentation, we earned net income of $3.7 billion, a 5% increase from the prior quarter. Our core guaranty business drove strong net revenues in the first quarter, with $5.9 billion in guaranty fee revenue accounting for 81% of net revenues. We earn these guaranty fees in exchange for providing credit protection on mortgage-backed securities we issue in the secondary market.

Our first quarter performance also benefited from lower non-interest expense, as recent cost reduction actions translated into savings. Non-interest expense declined 8% quarter-over-quarter and 16% year-over-year, reducing the administrative expense ratio from 12.6% in the fourth quarter of 2025 to 10.2% in the first quarter.
Turning to the other components of pre-tax income, other losses in the first quarter were driven by investment losses on purchases of Fannie Mae MBS for our retained mortgage portfolio, and the $277 million credit loss provision included both single-family and multifamily provisions.

Finally, to evaluate our financial performance and capital efficiency, we calculate an illustrative return on required equity measure, based on annualized year-to-date net income divided by our average Common Equity Tier 1 capital requirement. The first quarter illustrative return was 10.4%, an increase of 20 basis points from the prior quarter.

Guaranty Book and Net Interest Income
Page 3 highlights the size and stability of our guaranty business, driven by our $4.1 trillion guaranty book. At the end of 2025, we remained the largest guarantor of residential mortgage debt outstanding in the U.S., backing an estimated 24% of single-family and 21% of multifamily mortgage debt outstanding. While guaranty fee revenue continues to drive a substantial majority of our net interest income, our portfolio income also increased 2% quarter-over-quarter and 9% year-over-year. I will discuss our portfolios further on page 14.

Net Interest Margin
On page 4, our net interest margin increased slightly from 2025 levels. Our total guaranty book continued to reprice higher in the first quarter, as higher average guaranty fees in our larger Single-Family business outweighed a decline in average guaranty fees in the Multifamily business. I will discuss key factors that impact pricing when I discuss our business segment results.

Select Credit Metrics
Turning to our credit metrics on page 5, single-family credit performance was relatively stable quarter-over-quarter, and our single-family serious delinquency rate remained near historically low levels. Our multifamily serious delinquency rate increased in the first quarter as additional loans became seriously delinquent due to sustained market challenges in recent periods.

Allowance for Credit Losses
On page 6, we highlight offsetting impacts that resulted in a flat allowance quarter-over-quarter. We built our single-family allowance by $14 million, with $89 million in net charge-offs more than offset by a $103 million provision for credit losses. And we reduced our multifamily allowance by $14 million, with $188 million in net charge-offs, which drove the net charge-off ratio 7 basis points higher than the prior quarter. The impact of these net charge-offs on the multifamily allowance was largely offset by a $174 million provision for credit losses, primarily driven by an increase in loan delinquencies and weakened property valuations on certain problem loans.

Non-Interest Expense
On page 7, our first quarter administrative expense was 19% lower quarter-over-quarter and 25% lower year-over-year, driven by recent actions to reduce our workforce, spending on contractors and consultants, and our real estate footprint.
While our results may vary from quarter to quarter, we are committed to sustaining a smaller cost base by remaining focused on operational efficiency, including by automating manual processes and increasing productivity with AI.

Regulatory Capital
On page 8, we discuss the drivers of our regulatory capital requirements. Risk-weighted assets and risk density increased quarter-over-quarter, driven by market risk from retained mortgage portfolio growth, credit risk on new acquisitions, and less capital relief from credit risk transfer, or CRT, transactions. Our CET 1 capital requirement declined in the first quarter as an increase in the minimum requirement was more than offset by a $3 billion reduction in the stability capital buffer, which is recalibrated annually.

Net Worth and Regulatory Capital
On page 9, we highlight our success in continuing to build our net worth and make progress towards meeting our capital requirements. Since January 2020, we have increased our net worth by $99 billion, including $52 billion since we began reporting our capital position under the enterprise regulatory capital framework for the fourth quarter of 2022.

Single-Family Highlights
On page 10, the Single-Family business remained a large, stable contributor to net revenues. In the first quarter, the business acquired $99 billion of loans - the highest quarterly volume since 2022 - and generated $6 billion in net revenues. Base guaranty fee revenue was relatively stable quarter-over-quarter and year-over-year as the guaranty book continued to reprice higher, offsetting the impact of book declines. Although portfolio income was higher in the first quarter, an $86 million increase in hedge accounting expenses resulted in slightly lower net revenues quarter-over-quarter. To wrap up this page, significant reductions in non-interest expense and higher fair value gains in the first quarter, partially offset by higher investment losses, resulted in higher net income quarter-over-quarter and year-over-year.

Credit Characteristics of Single-Family Acquisitions
Page 11 reinforces the strong credit quality of our single-family acquisitions in the first quarter. Weighted-average OLTV declined slightly given the higher share of refinance acquisitions in the first quarter, while weighted average FICO scores remained stable quarter-over-quarter at 757. Finally, the share of our first quarter single-family acquisitions with DTI greater than 43% declined 2 percentage points from 2025 levels to 34%, driven by a higher share of refinance activity in the first quarter.

Multifamily Highlights
Turning to page 12, Multifamily continued to price business competitively to deliver $17 billion in new business volume and grow the guaranty book to $542 billion in the first quarter. This growth supported relatively stable multifamily guaranty fee revenue quarter-over-quarter, despite a lower average guaranty fee charged on the multifamily guaranty book. As a reminder, to price our Multifamily business, we consider many factors, including individual loan characteristics and external forces, such as interest rates, MBS spreads, the availability and cost of other sources of liquidity, and our mission-related goals.

Despite the strength of multifamily net revenues, the higher first quarter provision for credit losses and shift from other gains to other losses drove multifamily net income lower quarter-over-quarter and year-over-year.

Multifamily Credit Characteristics and Credit Enhancement
On page 13, we remain focused on maintaining the credit quality of our multifamily guaranty book. Weighted-average debt service coverage and original loan-to-value metrics for both the guaranty book and new acquisitions remained roughly in line with 2025 levels. Also, because of our unique DUS® risk-sharing model and our CRT programs, nearly all our multifamily guaranty book had some form of credit protection at quarter-end.

Balance Sheet and Fannie Mae Debt Portfolios
Finally, on page 14, we highlight how we are effectively using our balance sheet as our net worth grows. We grew our retained mortgage portfolio by $36 billion in the first quarter and reduced our corporate liquidity portfolio by $7 billion, reflecting a shift in our portfolio mix towards higher-yielding investments. We also increased long-term debt issuance during the quarter to replace debt scheduled to mature later in the year and to further enhance our liquidity position by taking advantage of favorable market conditions.

Conclusion
To wrap up, our first quarter results underscore the strength of our business model. We benefited from the durability and quality of our $4.1 trillion guaranty book, a leaner cost structure that supported higher earnings, and a strong and growing net worth position. Together, these strengths position us well to navigate market challenges, deliver solid results, and continue supporting the U.S. housing market.
Thank you again for joining today's webcast.

Fannie Mae Moderator:
Thank you, everyone. That concludes today's webcast. You may disconnect.