In order to have a return on capital sufficient to attract private investors, the GSEs would have to charge g-fees of about 76 basis points, according to former Freddie CEO Don Layton.
Almost all of the decline in combined GSE profits was due to a spike in loan-loss provisions. But while Fannie’s provisions continued to grow in the fourth quarter, Freddie’s may have peaked in the third quarter. (Includes data chart.)
Sagging home prices forced the GSEs to post a combined $4.34 billion provision for credit losses in the third quarter, undercutting retained earnings. (Includes data chart.)
The GSEs earned a combined $20.5 billion in theoretical net income under the severely adverse economic scenario of the 2022 stress tests. But those returns would vanish if they had to reserve for deferred tax assets.
The GSEs’ latest SEC filings reveal a combined capital shortfall of $359 billion at the end of the first quarter. But combined earnings were a healthy $8.21 billion for the quarter. (Includes data chart.)
Profits of $34.29 billion in 2021 will suffer in 2022 as both amortization income from refinances and benefits for credit losses ebb. (Includes data chart.)
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