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Imagine what can happen if those sales go up 3 or 4 months in a row!
— Chris Roberts (@RobertsChris6) March 21, 2024
Seriously, not buying what the WSJ is selling in re Fannie stock price 'surge'. They do know that the companies make $10 a share every year & shares 'were' under a $1 not too long ago.
Give us 'reporting'! pic.twitter.com/gqdgVlcY3j
Imagine what can happen if those sales go up 3 or 4 months in a row!
— Chris Roberts (@RobertsChris6) March 21, 2024
Seriously, not buying what the WSJ is selling in re Fannie stock price 'surge'. They do know that the companies make $10 a share every year & shares 'were' under a $1 not too long ago.
Give us 'reporting'! pic.twitter.com/gqdgVlcY3j
Fannie Mae, Freddie Mac Shares Surge After Jump in Home Sales
Published: March 21, 2024 at 12:32 p.m. ET - By Will Feuer
Shares of Fannie Mae and Freddie Mac climbed to their highest levels in almost three years
after the National Association of Realtors said U.S. home sales rose in February from
the month prior.
Shares of Fannie Mae, officially known as the Federal National Mortgage Association,
popped 8% to $1.95, on pace for its highest close since June of 2021.
Shares of Freddie Mac, officially known as Federal Home Loan Mortgage, rose more than
10% to $1.62, also on pace for its highest close since June of 2021.
Earlier Thursday, the NAR said sales of existing homes, the majority of purchases,
surged 9.5% in February to a seasonally adjusted annual rate of 4.38 million.
Economists surveyed by The Wall Street Journal had estimated sales of previously
owned homes to fall 1.3% in February.
The monthly increase marked the first time in more than two years that sales increased
for two consecutive months.
The forward momentum in sales over the last two months comes just ahead of the
spring selling season and follows one of the most sluggish periods for the housing
market in recent history. Home sales in 2023 fell to the lowest levels in nearly 30 years.
Since 2022, higher mortgage rates, high home prices and limited inventory have stifled
sales, which were still down 3.3% from a year earlier in February.
Write to Will Feuer at Will.Feuer@wsj.com
Fairholme GSE Lawsuit Is Over; Time for the Appeal?
dhollier@imfpubs.com
The District Court for the District of Columbia on Wednesday put the final nail in the coffin for Fairholme Funds v. Federal Housing Finance Agency. At least until one or both parties to the lawsuit appeal.
In August, a jury found that FHFA had acted inappropriately when it agreed to the net worth sweep. The jury awarded Fannie Mae and Freddie Mac shareholders $613 million in damages. In October, the court ruled that Fannie shareholders were also entitled to prejudgment interest and ordered both sides to come up with a plan for allocating those damages.
Since then, the opposing attorneys have been arguing about the details. This was complicated because there were really two cases involved: a class action brought by Fairholme Funds and individual lawsuits brought by Berkley Insurance.
On Wednesday, District Court Judge Royce Lamberth finally issued his memorandum and order, ending the District Court proceedings mostly, but not entirely, in favor of the plaintiffs. His order established exactly how much FHFA (really Fannie Mae and Freddie Mac) will have to pay in damages and interest.
Freddie junior preferred shareholders will receive $281.8 million in damages and another $31.2 million will go to Freddie common shareholders. Fannie junior preferred shareholders will receive $299.4 million in damages plus simple interest at a fixed rate of 5% over the Federal Reserve’s discount rate as of Aug. 17, 2012. Fannie common shareholders weren’t included in the lawsuits.
Payment Allocation Plan $FNMAS $FMCChttps://t.co/k96n8S7YsA
— José E Burgos Lugo, PA (@TheBurgosGrp) March 20, 2024
it's a John Paulson sponsored Dinner ...
and Don't ferget to Tip yer Waiter :-) :-) :-) https://t.co/ZMqcBInHJh
— Cmdr Ron Luhmann (@usnavycmdr) March 20, 2024
Main Document Judgement Link:
https://storage.courtlistener.com/recap/gov.uscourts.dcd.163155/gov.uscourts.dcd.163155.421.0.pdf
Plan of Allocation Link:
https://storage.courtlistener.com/recap/gov.uscourts.dcd.163155/gov.uscourts.dcd.163155.421.1.pdf
$Booooom ! - Why the $CEO of $Fannie $Mae believes
a company’s mission and performance can—and should—go hand in hand
BY: FORTUNE EDITORS - March 20, 2024 at 3:00 AM PDT
Priscilla Almodovar, CEO of Fannie Mae
On this episode of Fortune’s Leadership Next podcast, co-hosts Alan Murray and Michal Lev-Ram talk to Priscilla Almodovar, CEO of Fannie Mae, about how the company has changed since she took over the top role a year ago, who her leadership mentors were, and how both homeowners and renters are faring in the U.S. today. They also discuss how Fannie Mae uses AI and why Almodovar remains surprised that most Americans don’t understand what her company does.
Transcript
Alan Murray: Leadership Next is powered by the folks at Deloitte who, like me, are exploring the changing rules of business leadership and how CEOs are navigating this change.
Welcome to Leadership Next, the podcast about the changing rules of business leadership. I’m Alan Murray.
Michal Lev-Ram: And I’m Michal Lev-Ram.
So today’s guest was Priscilla Almodovar. She’s the CEO of Fannie Mae and she is the only Latina CEO of a Fortune 500 company. We recorded this episode on International Women’s Day, by the way, so it felt very fitting.
Murray: Yeah, I was fascinated, Michal. You don’t know this part of my life, but for the decade that I ran the Washington [D.C.] bureau of the Wall Street Journal, Fannie Mae was a very big presence in my life because they almost ran Washington. They were a huge powerhouse with a massive lobbying machine. And whenever you suggested that anything was amiss with the business model, they would come down on you like a ton of bricks. All of that, of course, changed with the Great Recession, and Fannie Mae went into conservatorship and turned into a very different organization, which she now heads. So I was very interested to hear about the new Fannie Mae.
Lev-Ram: Yeah, clearly some changes over the last, especially going back to the last 15 years or so, and it was it was a great conversation. One of the things that struck me, by the way, which I guess has not changed, is that there are a lot of for all the power that Fannie Mae once had and for the very large role it still plays in the housing market, a lot of Americans don’t really know what this company does and how it’s structured, which, as you said, is pretty unique.
Murray: Which they should, because in most cases they benefit from it. If you’re buying a kind of a normal-sized house, it creates the market that enables you to get the price that you get. So we talk about all of that in this episode. I really enjoyed it. The other thing that people need to understand is Fannie Mae is number 28 on the Fortune 500 list. We’re talking about a really large company.
Lev-Ram: Yeah, absolutely. By the way, I tried to get her to tell us where I should and could buy a home. She didn’t really deliver on that, but she had a lot of other fascinating things to say, including just about her own life experience, her background, and sort of how that positioned her to lead this company today and to, you know, try and fulfill on their mission. So, without further ado, here is our conversation with Priscilla.
Welcome, Priscilla. It’s been a little over a year since you became CEO of Fannie Mae. And I think our first question is just how is it going?
Priscilla Almodovar: Thank you. Thank you for having me. It’s been going great. A year in and I’m hitting my stride. It’s a great, great place to be.
Lev-Ram: Any surprises along the way?
Almodovar: Yeah. Look, you know what has surprised me the most has been a pleasant surprise. Fannie Mae is a great company. I’m surprised how many Americans don’t know what Fannie Mae does. It’s been around for 85 years. We provide liquidity to the housing system, make sure it works for Americans, and a lot of consumers don’t know that. And today it’s critically important. We hold one in four mortgages, $4.3 trillion in assets. And, you know, we’re making housing possible for everyone.
Murray: I’d like to dig in on that a little bit. It is a massive company, it’s like number 28 on the Fortune 500 list. But it’s an unusual company, right? You were chartered by the government during the Great Depression. You’re still, these days since the Great Recession 15 years ago, you’ve been operating under conservatorship. I guess the question I’ve always had is, I understand in the Great Depression why we needed Fannie Mae. There was a crisis. But today we have the deepest financial markets in the world. Why do we need a government-chartered enterprise to be part of that?
Almodovar: Yeah, well, look, taking a step back. We do have a unique business model. So we’re not in the primary mortgage market. We buy mortgages from lenders. We securitize them and sell them to investors and mortgage-backed securities. As part of that, our business model is we manage a lot of risk. We you know, we guarantee the mortgages. So we take credit risk. We take operational risk. We take capital markets risk, cyber risk. So the pipes, making sure the markets function and work. We bring liquidity to the market. And you know, a great example of the role that we play, and we can’t underestimate how important it is to have high functioning liquid housing markets. We’re the only place in the world where you have a 30-year fixed rate mortgage product. And a great, I think, Exhibit A of why it’s so important to have a Fannie Mae is what happened during the pandemic. You know that story has not been told: 1.5 million households kept their home during the really hard time because of our loss mitigation programs. And we kept the mortgage markets going. Today, 99% of those have been resolved.
Murray: And we would yeah, we…
Almodovar: That couldn’t have kind of happened.
Murray: Private banks wouldn’t have done.
Almodovar: Exactly. And it was because we were there. Our business model is high functioning. It’s safe and sound. We had the liquidity, and we were able to do that.
Murray: The other concern in the past, of course, has been that, as you said, you manage risk, but the fear that that risk ends up back on the taxpayer, that it becomes public risk. How do you deal with that?
Almodovar: Yeah, well, look, today the mortgage market in the U.S. is completely different from 15 years ago. So we’re looking ahead today. The loan rules that did not exist before today, loan quality is very different today. So when we talk about the housing market per se, it’s very sound from a credit risk perspective. When I look at our FICO scores, when I look at loan-to-value, debt-to-income ratios, it has never been this safe. So the rules of the road for mortgage finance in the U.S. are very different. As a country, we learned our lesson from 15 years ago and you have regulation. I mean, I just think of Fannie Mae, the company we are today, our business model, we have a capital rule. We do stress testing. We have a very strong regulator in the Federal Housing Finance Agency. This didn’t exist before.
Murray: And I think I’m right that at the end of the day, it also didn’t cost the taxpayers anything.
Almodovar: Thank you for that. Not only did it not cost the taxpayer anything. So I think we drew 119 billion from Treasury. We have paid back 181 billion. So, it’s been a great investment for the taxpayer. It’s been a great deal for the taxpayer. And in the last few years, we’ve been built building capital through retained earnings. Today, Fannie Mae, this was as of December of 2023, 78 billion in capital. We’re still undercapitalized, but we’re building capital. We see how as a business, it’s an operating model that is very well-run and very well risk managed.
Lev-Ram: So can I just go back real quick? And I know, Alan, we want to get into the outlook for 2024. But before we do that, you know, you mentioned being surprised by how there’s still a little bit of a discrepancy and sort of the impact and the role that Fannie Mae plays versus the awareness of Americans, and I’m surprised by that. I mean, going back to the housing crisis 15 years ago, what you were describing that took place during COVID, the fact that there is still kind of this gap in awareness, how much of an issue is that for you? Because, of course, one of the things we’re going to get to is your passion and your mission to make the housing market more equitable, more accessible to all. So talk more about the awareness gap, I guess.
Almodovar: Yeah, look, part of the issue as a, if you will, we’re a B2B company, so we don’t deal directly with the consumer. So right there, the consumer directly does not know us. We deal with our lenders and they deal with the consumer. So that by definition is always an issue. But most consumers don’t understand that the lender who probably originated that mortgage is not the one who continues to own that mortgage. It’s probably not the one who’s servicing the mortgage. I think what we’re trying to do is build that awareness through our home education programs. More and more, we are filling that void for the consumer and leaning into our mission and our charter. I mean, our duty to serve is to make the housing system more fair, more equitable, and I think the consumers are starting to become aware that something is changing. So, for example, when I think about our strategy today, first of all, number one job is liquidity in the market. And the pandemic is just a great example of why that is so important.
But our two strategic objectives are how do we make the housing system more fair and more sustainable? And we look at everyone from renters to homebuyers to homeowners, and it’s about sustainable whatever you might have, a renter or a homeowner. And we’re making it more fair by using technology. So, for example, before, if you were a renter in this country, your rent did not count. Today, through technology, Fannie Mae is taking that credit risk and if the consumer shows us through their bank statements, we can tell what probably is a rent payment, the regularity of that payment, and we could make that consumer eligible.
Murray: That’s huge.
Almodovar: It’s huge.
Murray: You can qualify people instead of a credit score, qualify them on a renter’s score.
Almodovar: That that did not exist two years ago. And it’s something Fannie Mae led the charge. We started with renters. We went to our landlord partners and said, we’re willing to pay for it because we want to the test the concept. And today, I’m happy to say over 500,000 rentals units are reporting their rent payments. On the homeownership side, we have qualified 5,000 now homeowners that did not have FICO scores. Those that didn’t have a FICO score have one today. And those that did have seen an increase of like 38 points. That’s quite meaningful. So, you know, one thing we’ve learned is that housing payment is a housing payment, whether it’s a rental payment or principal and interest payment, and we’re making that count. So it’s those types of innovations that I’m hopeful, job number one for a CEO is to make sure your stories told and people understand that, and I’m very committed to doing that. I mean, our employees come to work every single day very proud for what they do for the country. And it’s meaningful. It’s super meaningful. I mean, housing, as you all know, is probably the number one asset for most people and it’s foundational to life’s outcomes.
Murray: You wrote a great piece for Fortune, appreciate you doing that, called “A Tale of Two Markets,” that we have a problem in the real estate market right now and it’s working very differently for different people. Can you explain that?
Almodovar: Yeah, yeah. It’s funny how quickly the housing market is changing, but that was probably in the Fall or middle of last year. The “tale of two markets” meaning if you’re a home owner today, you’re probably in a very good place. You’re housing, you’re happy. You probably have a mortgage with a 3% or 4% handle.
Murray: I do.
Almodovar: Exactly. You’ve seen house appreciation. I mean, home prices during the pandemic went up like 20%. And last year, home prices were up 7%. This year, we’re expecting home prices to continue going up, not at that same trajectory, maybe more than 3 to 4%. So you’re feeling really good. And that’s what we call the lock-in effect. You’re not moving if you’re not a homeowner, and if you want to be a homeowner, it’s hard because affordability. Mortgage rates are higher. They have come down. In October of last year, mortgage rates hit that 8% number, and psychologically, that’s a big difference from 3%, both psychologically and also your pocketbook. It’s a lot more. So rates have come down, but mortgages are still expensive, and home prices are still high because there’s no supply. So that’s where we have limited tools for supply. We’re on the financing side. But supply, ultimately, is one of the key issues and why it’s a tale of two markets. If you’re a homeowner, you’re feeling really good. If you want to be a homeowner. Or even renters. I mean, today, if you look at our population, let’s say we have 124 million households, a third of them are renters. Those renters, more than 50% are cost burdened. By that we mean they’re spending more than 30% of their income on rent. It’s just affordability is a key issue. And that’s where it’s a tale of two markets.
Lev-Ram: So, Priscilla, I’m going to jump in here and ask a question for a friend. Where should first time buyers be looking? Are there hotspots that are kind of under the radar? And, you know, I’m sitting here in the Bay Area, so this is not the place. But what are you seeing across the country?
Almodovar: Look, I would say my advice to any for anyone who wants to be a homeowner, first time homeowners, by the way, the millennials are driving that demand. When you look at where that demand is coming from, it’s the millennials and, by the way, right behind them, the older Gen Zs are right behind as well. So the first thing I would say is fix your credit. I think one of the things Fannie Mae is doing is really understanding what are the obstacles for first-time homeowners and surprisingly, having a thin credit or no credit is an obstacle. And that’s why these positive rent payments is a key. So if you’re a renter, see if your landlord will report your positive rent. So get that all fixed, I think is job number one. Education is a big part, just generally what it means to be a homeowner. You know, today, if you ask consumers what makes a good life, they usually list owning a home as along with good health, a good job. But you have to understand what it means to be a homeowner, to really understand the cost. You know, throughout the, I would say throughout the country, home prices have gone up. Obviously, there are pockets where they’ve gone up higher, but it’s throughout the country, I would say. But there’s a lot you can do in the meantime. Just getting smart about what it is to be a homeowner and save and it’ll happen. The American dream is still very much alive. It might just take a little longer.
Lev-Ram: Do you see, though, a little bit of a I guess, a psychological shift with the younger generations, with millennials and Gen Z? I mean, I feel like I’ve seen some articles and studies out there that not only are people buying homes later in life, which make sense just given the economy and the housing market, but that there’s also like a little bit of a shift in perception of needing to be a homeowner? Do you look at that?
Almodovar: Look, rent or homeowner to us, we’re agnostic as we were about having someone having a stable, affordable home they can live in. I would say yes, it’s the first time, you know, 35 years old. But I would say the millennials still want to be homeowners. When we do our surveys, having a home is still very much something that millennials are driving. In fact, we do a monthly home purchase sentiment where we try to see how people are feeling, both sellers and future homeowners. And February was the third consecutive month where sellers, by the way, are saying this might be a good time to sell. That’s good news for the sort of spring buying selling season. But purchasers are also saying while they’re pessimistic that they can buy a home, i’s the first time we’re seeing them saying, you know what? Mortgage rates are probably going to come down. Maybe this is the time I should start looking at a home. So I do think the millennials are still driving that demand. If they want to be a homeowner, it’s still being driven by millennials.
Murray: I’m surprised to hear you say you’re agnostic between buying and renting. I mean, I think there used to be a rhetoric that came out of Fannie Mae traditionally that owning a home was kind of a civic virtue, that the goal was to increase the percentage of people who actually owned a home because all sorts of other good things kind of responsibility went along with that. You don’t feel that?
Almodovar: So first of all, the world is very different from, I don’t know, the past, again, I’m living in the future of Fannie Mae.
Murray: Yeah, I’m a guy of the past. I’m an old guy.
Almodovar: Okay. So, I’m in the future. So that’s number one. Number two, a third of households are renters. And I grew up as a renter, so my bias is that being a renter is fine. Now, did my parents dream to have a home? Was that home what changed the trajectory of our life? Absolutely. And today, owning a home is still the number one way where families build generational wealth. And if we’re honest about it, there is still a stubbornly huge gap between white households and nonwhite households and Black households, there’s still this 30% plus or minus gap…
Murray: Wealth gap.
Almodovar: Well, there’s a homeownership gap.
Murray: Which is also a wealth gap.
Almodovar: There’s also a wealth gap. Right. Exactly. And then Latinos, the homeownership gap is about 20%. Latinos, interestingly, are the one cohort they’re having improvements in homeownership. And I think we can talk about that. That partly could be culturally as well. For Latinos, owning a home is something that’s becoming, there was an article recently that it’s becoming a family affair. I mean, they will pool their resources, they will buy that home. So I think if that was a bias before, I think it’s still the number one way to build wealth in this country. It’s still, as I said, when you ask people what’s a good life, they do mention homeownership. I do believe millennials still want to be homeowners and raise a family. But it is not the only way. The same way we have to change the perception of what Fannie Mae is and what we do is being a renter, if you have a stable, affordable home, you have roots in your community as well. So that’s my orientation. Look, today, Fannie Mae, we support, we’re 20% of the rental financing market.
Murray: Is that right?
Almodovar: Yeah, 20, we finance 20% of rental units in the country and in single family we’re about 25% of the entire single family. So we’re the full spectrum and it’s important for Fannie Mae to think about the entire journey of the consumer from renter and renters who want to become a home buyer. And once they’re a home buyer, homeowner, and that’s how we view our work.
[Music starts.]
Murray: Jason Girzadas, the CEO of Deloitte U.S., is the sponsor of this podcast and joins me today. Welcome, Jason.
Jason Girzadas: Thank you, Alan. It’s great to be here.
Murray: I have a sense, Jason, from conversations on Leadership Next and elsewhere, that business leaders today better understand the benefits of having a diverse set of voices at the management table. But what are some of the lessons you’ve learned through Deloitte’s own DEI journey?
Girzadas: Lots of lessons learned I think. We’ve certainly made progress. We feel like that’s a function of a couple of things. Deloitte is very proud to have published twice a transparency report that sets forward long-term expectations for the diversity of our workforce and how we hold ourselves accountable. That is meant to be, and I think has served to be a role model stance for us to take and one that we encourage all businesses to replicate.
The second is to get specific. In addition to transparency, the specific objectives around gender diversity, around Black and Hispanic Latinx, as well as other cohorts that we have really established not only a recruitment and retention, but also advancement goals for.
And finally, adding to the mix, how we intend to hold ourselves accountable for supplier diversity as well as longer-term ambitions for us in this space. So our experience is somewhat emblematic of what a lot of large organizations go through. But for us, the commitment and transparency as well as the specificity around cohorts has made a difference. And we’ve seen positive results in the last two years that we’re hoping to build upon. Do we declare success? Absolutely not. But it’s made all the difference for us.
Murray: Jason, thanks for your perspective and thanks for sponsoring Leadership Next.
Girzadas: Thank you.
[Music ends.]
Lev-Ram: Priscilla, you brought this up and I want to dig a little bit deeper, but one of the things we wanted to talk to you about is you and you are the only Latina CEO on the Fortune 500. So, tell us more about your background and how it informs your leadership today at Fannie Mae.
Almodovar: Yeah, look, I’m the only but I’m so I’m so optimistic it won’t be for long because, again, the Latino cohort is real and women also. But the Latino cohort is having a lot of gains educationally and otherwise. So as I mentioned, I grew up in Brooklyn. My family there, I’m Puerto Rican. My parents came to the mainland in the 1950s. Like many Puerto Rican, the Puerto Rican diaspora for a better life. And I grew up in a very optimistic household and at my kitchen table, I heard, like probably many American families do today, talked about a good job. Education was like, you know, that’s what neither of my parents at the time had gone to college. So an education and saving for a home. And I still remember when I was five years old, they bought their first home. I still remember the first night I slept in my room. And I think that’s informed a lot of what I do. And I’ve considered myself very lucky. I’ve had a 30 year plus career in finance and about 20 years ago discovered this, what’s a unique part of finance is housing finance. And I’ve been able to build a career. I’ve had, this will be my fifth role in housing. Each of them I had worked with Fannie Mae. So the one great thing about joining this company, I came in with great admiration for the company for what they do, and I’ve just been very fortunate with each one to have a larger platform to influence more national policy issues.
Murray: When did it first occur to you, having grown up the way you described? When did it first occur to you that you could be CEO of one of the 30 largest companies in the country?
Almodovar: You know, I guess I never thought of “I’m going to be a CEO,” if I’m honest. I always, even from a young age, thought I would be leading something. I didn’t know what. Yes. I mean, I tell you, I tell this funny story, I it’s a bit embarrassing, but at six years old, I had an attache case as much as my book bag. So I think that says it all. And I think it comes really from my parents. I mean, my mom is now deceased. She thought she could do anything. I mean, it was just like this very this can do. And I just think I have inherited that, that I could figure it out.
Murray: You must have had moments along the way coming up through Wall Street finance where you were sitting in a room surrounded by a bunch of guys and where you said to yourself, this system is never going to allow me to get to the top.
Almodovar: That’s not true.
Murray: You never felt it.
Almodovar: You know, it’s the kind of thing where, again, look, in the 1990s there were very few women in finance, in law, in banking, and I never saw that as a as an obstacle. You know, if anything, I was in the room. I worked so darn hard. I wasn’t really trying to figure out the man woman thing. I just did my job and did it well and did project finance for the first ten years. And then I went to J.P. Morgan. I went to a state housing finance agency for three years, then went to J.P. Morgan, had an incredible career there. Were there times when I was the only woman in the room? Absolutely. But I still did my work really well and I think if anything, one of the great things of my position now at my age, you know, I could help change how people think. The face of leadership is changing, and I am just so excited to be part of that. So I look different. But I’m a leader and I really believe, back to your question about me as a leader. I think there’s leaders amongst all of us. So one of my leadership styles and at Fannie Mae, this was a little bit surprising, the first few months, but now the company has embraced it. I talk to the entire organization because as a leader, you want to hear what everyone I mean, we all contribute to the work we do. And it’s probably because I believe there’s a leader amongst all of us. So I never let that get in the way, Alan, being one of the few women.
Lev-Ram: Who are some of the other leaders you’ve worked with and for along the way, you know, male or female, that have really you think, you know, helped kind of paved the way or made a big impact on you?
Almodovar: Yeah, look, I’ve been very fortunate to work with many leaders that I’ve admired. You know, the one I will just say. But Jamie Dimon is probably the best banker that we, I will see in my generation. And this is not me dropping names. I will say he’s someone who genuinely cares about his leaders. Back to your woman question. Jamie doesn’t care if you’re a woman or a man. He just wants a job done and he treats everyone the same. He taught me to be a risk manager. One thing about working at a J.P. Morgan is you don’t realize you’re becoming a risk manager, but he’s very obsessed about end-to-end management, doing the right thing. So that that orientation, I think seeing that leadership and bank that so well run has been quite inspiring. I think back when I first started there were very few women where I was and there was one particular woman who’s now deceased who just like inspired me, like she was like this beautiful, [hard to hear] just this beautiful woman, patrician, and just took me under her wing. And so there were many.
Murray: That’s great. You know, we have a lot of conversations on this podcast about the purpose of business. Yeah. And it gets into debates over, you know, Milton Friedman famously said 50 years ago, the social responsibility is to make a profit for shareholders. We’ve had Jamie Dimon actually led at the Business Roundtable, this whole notion of stakeholder capitalism, redefinition of the purpose of the corporation. You’re in an interesting place because you do have a social mission in your charter. You have shareholders, but you have a clear social mission in your charter. How do you think about that debate? Do you think your model is a better model? That it needs to be infused in other companies? Where where are you on the great stakeholder capitalism debate?
Almodovar: Yeah, no, it’s a great question. You know, at Fannie Mae, as you say, it’s in our charter. So we have to balance mission and safety and soundness and a big part of our business model today is we need to get to that investable return. So return and running the company well is really important. It’s the only way we’re going to build capital right now. What I think is incredible is to me, the innovation at a Fannie Mae happens at the intersection of mission and safety and soundness and profitability, and it’s that tension where we probably do the best work. And, you know, I’m a believer, again, at Fannie Mae, it’s a lot easier because it’s what we do. That our workforce needs to look like the future homeowners. I mean, if I look at who the future homeowners are in this country, there’s a study out there that says by 2040, 90% of homeowners will be people of color. Well, our workforce should look like that, who we partner with, the suppliers we work with. So it’s very much of who we are to us is just how we run our business. To do it well, we have to understand our future homeowner, and that’s what we’re doing.
Murray: Mission and performance.
Almodovar: Mission and performance go hand in hand. You know, serving, I mean, this is true of I think many companies is, you have many stakeholders. You have shareholders for sure. But you’re a citizen of the communities where you work, you’re a citizen to your employees. So I think companies, well-run companies, and I think today most companies, I think, would say they really have to look at the full picture. And by the way, shareholders also expect that—they want good corporate citizens.
Murray: Most of them.
Almodovar: Yes.
Murray: Your shareholders, maybe.
Almodovar: Yes. Yes. No, I think it’s true of you know, I think, look, return is important. And by the way, there’s nothing wrong with that either. Right? So, you know, we are a capitalist society. And I think you can do good and make money at the same time, and the two do not have to be inconsistent.
Lev-Ram: So on that note, I wanted to also bring up the fact we recently had the State of the Union address and housing came up, right? This is a big focus. And while we’ve got plenty of bright spots in the economy, the housing market consistently has been really tough for a lot of people. Again, first time buyers and current homeowners as well because of mortgage rates. As you look out to 2024 and given certain new incentives now that are coming into the fray, like what do you see happening? I mean, is there going to be an easing up here and if so, when? And just what can you tell us about looking out into the future?
Almodovar: Yeah, look, our economists would say that 2024, the economy is still growing at a slower rate. You know, inflation in is coming down. The labor market is still strong. Even the news today, I mean, jobs and there’s still noise in the data, but still strong. We do think that mortgage rates will come down more, settle more in the sixes, low sixes, maybe high fives by 2025. So we do see mortgage rates coming down. So home sales, we expect this year home sales will go up. Last year, home sales were the lowest they’ve been in 30 years. So there’s some good news in the housing market we’re seeing. I mentioned the sentiment that sellers are saying, hmm, maybe this is a good time to sell. We’re seeing new home construction. So we as a country have not built housing at the rate that of new household formation. So new homes are coming online, new built homes. So supply is coming. That helps hopefully will help prices. We think prices will continue to go up, but not at the same pace. So there is some good news. And more and more, one thing that makes me optimistic is, as I mentioned, I used to run a state housing finance agency, I’m finding more mayors and governors are talking about housing because ultimately there’s an issue of supply. We need more supply of housing, you know, depending on which number you look at. Some people say we need 2 million more units of housing. Some people say we need 7 million. The point is we need a lot more housing and supply is ultimately a local issue. It’s a zoning issue. It’s a regulatory building code issue. And the fact that more folks are talking about that makes me optimistic.
Murray: How is AI going to change Fannie Mae?
Almodovar: Yeah, look, so so Fannie Mae has been using artificial intelligence and machine learning for a long time. Like we were the first ones to come up with a loan origination system that’s machine learning, that looks at how it would give an answer. So we’re looking at it very closely. So it’s helping us in our underwriting. So I mentioned rent as being, that’s that’s AI that’s doing that. What’s really exciting to me today is the consumer is changing and the economy. So think of the gig economy. So can we use machine learning and AI to look at bank statements differently to allow non-salary W2 income to count? Right. That would be one example. We’re using AI to understand our climate risk better. Right. Can we, from an informational perspective? Data understanding climate risk is another area. Collateral quality appraisal biases. So we’re using AI to help us look at appraisals differently. How appraisers judge a home and take out biases there. So there are many uses. We are very committed to taking a slower path and doing, you know, we have a governance model, an ethical framework to make sure that we’re doing it transparently. If we use a model that we could explain how it made decisions. We look at privacy and equity. We’re very excited about it.
And obviously one that doesn’t get a lot of hype, but I’m excited about is how we run the company. Think about fraud detection. You know, how do I know when I get a W-2, it’s not a fraudulent W-2. So a big part of AI for a financial institution like a Fannie Mae is fraud detection. Think of cyber. Think of all the anomalies. So looking at anomalies from a fraud perspective, from a cyber perspective. So there are many use cases. And that’s what we’re exploring now because there’s a lot of opportunities. So I’m very excited. One of the books I just read was The Worlds I See by Dr. Fei-Fei Lee.
Murray: Oh cool.
Almodovar: It’s very well done. And it’s good for all of us to understand, like, what is AI? What’s machine learning and how do we bring—her big takeaway is how do we bring a human-centered approach to all this work? So really, it’s a book I recommend, and I know it had an impact on me.
Murray: Fascinating conversation. Priscilla, thank you so much for taking the time to be with us. I hope we’ll see you at Fortune‘s Most Powerful Women event in California. You belong there.
Almodovar: Looking forward to it. Yeah. Thank you.
Lev-Ram: Thank you. Thank you, Priscilla.
Almodovar: Nice to see you.
Why the CEO of Fannie Mae believes a company’s mission and performance
can—and should—go hand in hand -
BY: FORTUNE EDITORS - March 20, 2024 at 3:00 AM PDT
Priscilla Almodovar, CEO of Fannie Mae
On this episode of Fortune’s Leadership Next podcast, co-hosts Alan Murray and Michal Lev-Ram talk to Priscilla Almodovar, CEO of Fannie Mae, about how the company has changed since she took over the top role a year ago, who her leadership mentors were, and how both homeowners and renters are faring in the U.S. today. They also discuss how Fannie Mae uses AI and why Almodovar remains surprised that most Americans don’t understand what her company does.
Transcript
Alan Murray: Leadership Next is powered by the folks at Deloitte who, like me, are exploring the changing rules of business leadership and how CEOs are navigating this change.
Welcome to Leadership Next, the podcast about the changing rules of business leadership. I’m Alan Murray.
Michal Lev-Ram: And I’m Michal Lev-Ram.
So today’s guest was Priscilla Almodovar. She’s the CEO of Fannie Mae and she is the only Latina CEO of a Fortune 500 company. We recorded this episode on International Women’s Day, by the way, so it felt very fitting.
Murray: Yeah, I was fascinated, Michal. You don’t know this part of my life, but for the decade that I ran the Washington [D.C.] bureau of the Wall Street Journal, Fannie Mae was a very big presence in my life because they almost ran Washington. They were a huge powerhouse with a massive lobbying machine. And whenever you suggested that anything was amiss with the business model, they would come down on you like a ton of bricks. All of that, of course, changed with the Great Recession, and Fannie Mae went into conservatorship and turned into a very different organization, which she now heads. So I was very interested to hear about the new Fannie Mae.
Lev-Ram: Yeah, clearly some changes over the last, especially going back to the last 15 years or so, and it was it was a great conversation. One of the things that struck me, by the way, which I guess has not changed, is that there are a lot of for all the power that Fannie Mae once had and for the very large role it still plays in the housing market, a lot of Americans don’t really know what this company does and how it’s structured, which, as you said, is pretty unique.
Murray: Which they should, because in most cases they benefit from it. If you’re buying a kind of a normal-sized house, it creates the market that enables you to get the price that you get. So we talk about all of that in this episode. I really enjoyed it. The other thing that people need to understand is Fannie Mae is number 28 on the Fortune 500 list. We’re talking about a really large company.
Lev-Ram: Yeah, absolutely. By the way, I tried to get her to tell us where I should and could buy a home. She didn’t really deliver on that, but she had a lot of other fascinating things to say, including just about her own life experience, her background, and sort of how that positioned her to lead this company today and to, you know, try and fulfill on their mission. So, without further ado, here is our conversation with Priscilla.
Welcome, Priscilla. It’s been a little over a year since you became CEO of Fannie Mae. And I think our first question is just how is it going?
Priscilla Almodovar: Thank you. Thank you for having me. It’s been going great. A year in and I’m hitting my stride. It’s a great, great place to be.
Lev-Ram: Any surprises along the way?
Almodovar: Yeah. Look, you know what has surprised me the most has been a pleasant surprise. Fannie Mae is a great company. I’m surprised how many Americans don’t know what Fannie Mae does. It’s been around for 85 years. We provide liquidity to the housing system, make sure it works for Americans, and a lot of consumers don’t know that. And today it’s critically important. We hold one in four mortgages, $4.3 trillion in assets. And, you know, we’re making housing possible for everyone.
Murray: I’d like to dig in on that a little bit. It is a massive company, it’s like number 28 on the Fortune 500 list. But it’s an unusual company, right? You were chartered by the government during the Great Depression. You’re still, these days since the Great Recession 15 years ago, you’ve been operating under conservatorship. I guess the question I’ve always had is, I understand in the Great Depression why we needed Fannie Mae. There was a crisis. But today we have the deepest financial markets in the world. Why do we need a government-chartered enterprise to be part of that?
Almodovar: Yeah, well, look, taking a step back. We do have a unique business model. So we’re not in the primary mortgage market. We buy mortgages from lenders. We securitize them and sell them to investors and mortgage-backed securities. As part of that, our business model is we manage a lot of risk. We you know, we guarantee the mortgages. So we take credit risk. We take operational risk. We take capital markets risk, cyber risk. So the pipes, making sure the markets function and work. We bring liquidity to the market. And you know, a great example of the role that we play, and we can’t underestimate how important it is to have high functioning liquid housing markets. We’re the only place in the world where you have a 30-year fixed rate mortgage product. And a great, I think, Exhibit A of why it’s so important to have a Fannie Mae is what happened during the pandemic. You know that story has not been told: 1.5 million households kept their home during the really hard time because of our loss mitigation programs. And we kept the mortgage markets going. Today, 99% of those have been resolved.
Murray: And we would yeah, we…
Almodovar: That couldn’t have kind of happened.
Murray: Private banks wouldn’t have done.
Almodovar: Exactly. And it was because we were there. Our business model is high functioning. It’s safe and sound. We had the liquidity, and we were able to do that.
Murray: The other concern in the past, of course, has been that, as you said, you manage risk, but the fear that that risk ends up back on the taxpayer, that it becomes public risk. How do you deal with that?
Almodovar: Yeah, well, look, today the mortgage market in the U.S. is completely different from 15 years ago. So we’re looking ahead today. The loan rules that did not exist before today, loan quality is very different today. So when we talk about the housing market per se, it’s very sound from a credit risk perspective. When I look at our FICO scores, when I look at loan-to-value, debt-to-income ratios, it has never been this safe. So the rules of the road for mortgage finance in the U.S. are very different. As a country, we learned our lesson from 15 years ago and you have regulation. I mean, I just think of Fannie Mae, the company we are today, our business model, we have a capital rule. We do stress testing. We have a very strong regulator in the Federal Housing Finance Agency. This didn’t exist before.
Murray: And I think I’m right that at the end of the day, it also didn’t cost the taxpayers anything.
Almodovar: Thank you for that. Not only did it not cost the taxpayer anything. So I think we drew 119 billion from Treasury. We have paid back 181 billion. So, it’s been a great investment for the taxpayer. It’s been a great deal for the taxpayer. And in the last few years, we’ve been built building capital through retained earnings. Today, Fannie Mae, this was as of December of 2023, 78 billion in capital. We’re still undercapitalized, but we’re building capital. We see how as a business, it’s an operating model that is very well-run and very well risk managed.
Lev-Ram: So can I just go back real quick? And I know, Alan, we want to get into the outlook for 2024. But before we do that, you know, you mentioned being surprised by how there’s still a little bit of a discrepancy and sort of the impact and the role that Fannie Mae plays versus the awareness of Americans, and I’m surprised by that. I mean, going back to the housing crisis 15 years ago, what you were describing that took place during COVID, the fact that there is still kind of this gap in awareness, how much of an issue is that for you? Because, of course, one of the things we’re going to get to is your passion and your mission to make the housing market more equitable, more accessible to all. So talk more about the awareness gap, I guess.
Almodovar: Yeah, look, part of the issue as a, if you will, we’re a B2B company, so we don’t deal directly with the consumer. So right there, the consumer directly does not know us. We deal with our lenders and they deal with the consumer. So that by definition is always an issue. But most consumers don’t understand that the lender who probably originated that mortgage is not the one who continues to own that mortgage. It’s probably not the one who’s servicing the mortgage. I think what we’re trying to do is build that awareness through our home education programs. More and more, we are filling that void for the consumer and leaning into our mission and our charter. I mean, our duty to serve is to make the housing system more fair, more equitable, and I think the consumers are starting to become aware that something is changing. So, for example, when I think about our strategy today, first of all, number one job is liquidity in the market. And the pandemic is just a great example of why that is so important.
But our two strategic objectives are how do we make the housing system more fair and more sustainable? And we look at everyone from renters to homebuyers to homeowners, and it’s about sustainable whatever you might have, a renter or a homeowner. And we’re making it more fair by using technology. So, for example, before, if you were a renter in this country, your rent did not count. Today, through technology, Fannie Mae is taking that credit risk and if the consumer shows us through their bank statements, we can tell what probably is a rent payment, the regularity of that payment, and we could make that consumer eligible.
Murray: That’s huge.
Almodovar: It’s huge.
Murray: You can qualify people instead of a credit score, qualify them on a renter’s score.
Almodovar: That that did not exist two years ago. And it’s something Fannie Mae led the charge. We started with renters. We went to our landlord partners and said, we’re willing to pay for it because we want to the test the concept. And today, I’m happy to say over 500,000 rentals units are reporting their rent payments. On the homeownership side, we have qualified 5,000 now homeowners that did not have FICO scores. Those that didn’t have a FICO score have one today. And those that did have seen an increase of like 38 points. That’s quite meaningful. So, you know, one thing we’ve learned is that housing payment is a housing payment, whether it’s a rental payment or principal and interest payment, and we’re making that count. So it’s those types of innovations that I’m hopeful, job number one for a CEO is to make sure your stories told and people understand that, and I’m very committed to doing that. I mean, our employees come to work every single day very proud for what they do for the country. And it’s meaningful. It’s super meaningful. I mean, housing, as you all know, is probably the number one asset for most people and it’s foundational to life’s outcomes.
Murray: You wrote a great piece for Fortune, appreciate you doing that, called “A Tale of Two Markets,” that we have a problem in the real estate market right now and it’s working very differently for different people. Can you explain that?
Almodovar: Yeah, yeah. It’s funny how quickly the housing market is changing, but that was probably in the Fall or middle of last year. The “tale of two markets” meaning if you’re a home owner today, you’re probably in a very good place. You’re housing, you’re happy. You probably have a mortgage with a 3% or 4% handle.
Murray: I do.
Almodovar: Exactly. You’ve seen house appreciation. I mean, home prices during the pandemic went up like 20%. And last year, home prices were up 7%. This year, we’re expecting home prices to continue going up, not at that same trajectory, maybe more than 3 to 4%. So you’re feeling really good. And that’s what we call the lock-in effect. You’re not moving if you’re not a homeowner, and if you want to be a homeowner, it’s hard because affordability. Mortgage rates are higher. They have come down. In October of last year, mortgage rates hit that 8% number, and psychologically, that’s a big difference from 3%, both psychologically and also your pocketbook. It’s a lot more. So rates have come down, but mortgages are still expensive, and home prices are still high because there’s no supply. So that’s where we have limited tools for supply. We’re on the financing side. But supply, ultimately, is one of the key issues and why it’s a tale of two markets. If you’re a homeowner, you’re feeling really good. If you want to be a homeowner. Or even renters. I mean, today, if you look at our population, let’s say we have 124 million households, a third of them are renters. Those renters, more than 50% are cost burdened. By that we mean they’re spending more than 30% of their income on rent. It’s just affordability is a key issue. And that’s where it’s a tale of two markets.
Lev-Ram: So, Priscilla, I’m going to jump in here and ask a question for a friend. Where should first time buyers be looking? Are there hotspots that are kind of under the radar? And, you know, I’m sitting here in the Bay Area, so this is not the place. But what are you seeing across the country?
Almodovar: Look, I would say my advice to any for anyone who wants to be a homeowner, first time homeowners, by the way, the millennials are driving that demand. When you look at where that demand is coming from, it’s the millennials and, by the way, right behind them, the older Gen Zs are right behind as well. So the first thing I would say is fix your credit. I think one of the things Fannie Mae is doing is really understanding what are the obstacles for first-time homeowners and surprisingly, having a thin credit or no credit is an obstacle. And that’s why these positive rent payments is a key. So if you’re a renter, see if your landlord will report your positive rent. So get that all fixed, I think is job number one. Education is a big part, just generally what it means to be a homeowner. You know, today, if you ask consumers what makes a good life, they usually list owning a home as along with good health, a good job. But you have to understand what it means to be a homeowner, to really understand the cost. You know, throughout the, I would say throughout the country, home prices have gone up. Obviously, there are pockets where they’ve gone up higher, but it’s throughout the country, I would say. But there’s a lot you can do in the meantime. Just getting smart about what it is to be a homeowner and save and it’ll happen. The American dream is still very much alive. It might just take a little longer.
Lev-Ram: Do you see, though, a little bit of a I guess, a psychological shift with the younger generations, with millennials and Gen Z? I mean, I feel like I’ve seen some articles and studies out there that not only are people buying homes later in life, which make sense just given the economy and the housing market, but that there’s also like a little bit of a shift in perception of needing to be a homeowner? Do you look at that?
Almodovar: Look, rent or homeowner to us, we’re agnostic as we were about having someone having a stable, affordable home they can live in. I would say yes, it’s the first time, you know, 35 years old. But I would say the millennials still want to be homeowners. When we do our surveys, having a home is still very much something that millennials are driving. In fact, we do a monthly home purchase sentiment where we try to see how people are feeling, both sellers and future homeowners. And February was the third consecutive month where sellers, by the way, are saying this might be a good time to sell. That’s good news for the sort of spring buying selling season. But purchasers are also saying while they’re pessimistic that they can buy a home, i’s the first time we’re seeing them saying, you know what? Mortgage rates are probably going to come down. Maybe this is the time I should start looking at a home. So I do think the millennials are still driving that demand. If they want to be a homeowner, it’s still being driven by millennials.
Murray: I’m surprised to hear you say you’re agnostic between buying and renting. I mean, I think there used to be a rhetoric that came out of Fannie Mae traditionally that owning a home was kind of a civic virtue, that the goal was to increase the percentage of people who actually owned a home because all sorts of other good things kind of responsibility went along with that. You don’t feel that?
Almodovar: So first of all, the world is very different from, I don’t know, the past, again, I’m living in the future of Fannie Mae.
Murray: Yeah, I’m a guy of the past. I’m an old guy.
Almodovar: Okay. So, I’m in the future. So that’s number one. Number two, a third of households are renters. And I grew up as a renter, so my bias is that being a renter is fine. Now, did my parents dream to have a home? Was that home what changed the trajectory of our life? Absolutely. And today, owning a home is still the number one way where families build generational wealth. And if we’re honest about it, there is still a stubbornly huge gap between white households and nonwhite households and Black households, there’s still this 30% plus or minus gap…
Murray: Wealth gap.
Almodovar: Well, there’s a homeownership gap.
Murray: Which is also a wealth gap.
Almodovar: There’s also a wealth gap. Right. Exactly. And then Latinos, the homeownership gap is about 20%. Latinos, interestingly, are the one cohort they’re having improvements in homeownership. And I think we can talk about that. That partly could be culturally as well. For Latinos, owning a home is something that’s becoming, there was an article recently that it’s becoming a family affair. I mean, they will pool their resources, they will buy that home. So I think if that was a bias before, I think it’s still the number one way to build wealth in this country. It’s still, as I said, when you ask people what’s a good life, they do mention homeownership. I do believe millennials still want to be homeowners and raise a family. But it is not the only way. The same way we have to change the perception of what Fannie Mae is and what we do is being a renter, if you have a stable, affordable home, you have roots in your community as well. So that’s my orientation. Look, today, Fannie Mae, we support, we’re 20% of the rental financing market.
Murray: Is that right?
Almodovar: Yeah, 20, we finance 20% of rental units in the country and in single family we’re about 25% of the entire single family. So we’re the full spectrum and it’s important for Fannie Mae to think about the entire journey of the consumer from renter and renters who want to become a home buyer. And once they’re a home buyer, homeowner, and that’s how we view our work.
[Music starts.]
Murray: Jason Girzadas, the CEO of Deloitte U.S., is the sponsor of this podcast and joins me today. Welcome, Jason.
Jason Girzadas: Thank you, Alan. It’s great to be here.
Murray: I have a sense, Jason, from conversations on Leadership Next and elsewhere, that business leaders today better understand the benefits of having a diverse set of voices at the management table. But what are some of the lessons you’ve learned through Deloitte’s own DEI journey?
Girzadas: Lots of lessons learned I think. We’ve certainly made progress. We feel like that’s a function of a couple of things. Deloitte is very proud to have published twice a transparency report that sets forward long-term expectations for the diversity of our workforce and how we hold ourselves accountable. That is meant to be, and I think has served to be a role model stance for us to take and one that we encourage all businesses to replicate.
The second is to get specific. In addition to transparency, the specific objectives around gender diversity, around Black and Hispanic Latinx, as well as other cohorts that we have really established not only a recruitment and retention, but also advancement goals for.
And finally, adding to the mix, how we intend to hold ourselves accountable for supplier diversity as well as longer-term ambitions for us in this space. So our experience is somewhat emblematic of what a lot of large organizations go through. But for us, the commitment and transparency as well as the specificity around cohorts has made a difference. And we’ve seen positive results in the last two years that we’re hoping to build upon. Do we declare success? Absolutely not. But it’s made all the difference for us.
Murray: Jason, thanks for your perspective and thanks for sponsoring Leadership Next.
Girzadas: Thank you.
[Music ends.]
Lev-Ram: Priscilla, you brought this up and I want to dig a little bit deeper, but one of the things we wanted to talk to you about is you and you are the only Latina CEO on the Fortune 500. So, tell us more about your background and how it informs your leadership today at Fannie Mae.
Almodovar: Yeah, look, I’m the only but I’m so I’m so optimistic it won’t be for long because, again, the Latino cohort is real and women also. But the Latino cohort is having a lot of gains educationally and otherwise. So as I mentioned, I grew up in Brooklyn. My family there, I’m Puerto Rican. My parents came to the mainland in the 1950s. Like many Puerto Rican, the Puerto Rican diaspora for a better life. And I grew up in a very optimistic household and at my kitchen table, I heard, like probably many American families do today, talked about a good job. Education was like, you know, that’s what neither of my parents at the time had gone to college. So an education and saving for a home. And I still remember when I was five years old, they bought their first home. I still remember the first night I slept in my room. And I think that’s informed a lot of what I do. And I’ve considered myself very lucky. I’ve had a 30 year plus career in finance and about 20 years ago discovered this, what’s a unique part of finance is housing finance. And I’ve been able to build a career. I’ve had, this will be my fifth role in housing. Each of them I had worked with Fannie Mae. So the one great thing about joining this company, I came in with great admiration for the company for what they do, and I’ve just been very fortunate with each one to have a larger platform to influence more national policy issues.
Murray: When did it first occur to you, having grown up the way you described? When did it first occur to you that you could be CEO of one of the 30 largest companies in the country?
Almodovar: You know, I guess I never thought of “I’m going to be a CEO,” if I’m honest. I always, even from a young age, thought I would be leading something. I didn’t know what. Yes. I mean, I tell you, I tell this funny story, I it’s a bit embarrassing, but at six years old, I had an attache case as much as my book bag. So I think that says it all. And I think it comes really from my parents. I mean, my mom is now deceased. She thought she could do anything. I mean, it was just like this very this can do. And I just think I have inherited that, that I could figure it out.
Murray: You must have had moments along the way coming up through Wall Street finance where you were sitting in a room surrounded by a bunch of guys and where you said to yourself, this system is never going to allow me to get to the top.
Almodovar: That’s not true.
Murray: You never felt it.
Almodovar: You know, it’s the kind of thing where, again, look, in the 1990s there were very few women in finance, in law, in banking, and I never saw that as a as an obstacle. You know, if anything, I was in the room. I worked so darn hard. I wasn’t really trying to figure out the man woman thing. I just did my job and did it well and did project finance for the first ten years. And then I went to J.P. Morgan. I went to a state housing finance agency for three years, then went to J.P. Morgan, had an incredible career there. Were there times when I was the only woman in the room? Absolutely. But I still did my work really well and I think if anything, one of the great things of my position now at my age, you know, I could help change how people think. The face of leadership is changing, and I am just so excited to be part of that. So I look different. But I’m a leader and I really believe, back to your question about me as a leader. I think there’s leaders amongst all of us. So one of my leadership styles and at Fannie Mae, this was a little bit surprising, the first few months, but now the company has embraced it. I talk to the entire organization because as a leader, you want to hear what everyone I mean, we all contribute to the work we do. And it’s probably because I believe there’s a leader amongst all of us. So I never let that get in the way, Alan, being one of the few women.
Lev-Ram: Who are some of the other leaders you’ve worked with and for along the way, you know, male or female, that have really you think, you know, helped kind of paved the way or made a big impact on you?
Almodovar: Yeah, look, I’ve been very fortunate to work with many leaders that I’ve admired. You know, the one I will just say. But Jamie Dimon is probably the best banker that we, I will see in my generation. And this is not me dropping names. I will say he’s someone who genuinely cares about his leaders. Back to your woman question. Jamie doesn’t care if you’re a woman or a man. He just wants a job done and he treats everyone the same. He taught me to be a risk manager. One thing about working at a J.P. Morgan is you don’t realize you’re becoming a risk manager, but he’s very obsessed about end-to-end management, doing the right thing. So that that orientation, I think seeing that leadership and bank that so well run has been quite inspiring. I think back when I first started there were very few women where I was and there was one particular woman who’s now deceased who just like inspired me, like she was like this beautiful, [hard to hear] just this beautiful woman, patrician, and just took me under her wing. And so there were many.
Murray: That’s great. You know, we have a lot of conversations on this podcast about the purpose of business. Yeah. And it gets into debates over, you know, Milton Friedman famously said 50 years ago, the social responsibility is to make a profit for shareholders. We’ve had Jamie Dimon actually led at the Business Roundtable, this whole notion of stakeholder capitalism, redefinition of the purpose of the corporation. You’re in an interesting place because you do have a social mission in your charter. You have shareholders, but you have a clear social mission in your charter. How do you think about that debate? Do you think your model is a better model? That it needs to be infused in other companies? Where where are you on the great stakeholder capitalism debate?
Almodovar: Yeah, no, it’s a great question. You know, at Fannie Mae, as you say, it’s in our charter. So we have to balance mission and safety and soundness and a big part of our business model today is we need to get to that investable return. So return and running the company well is really important. It’s the only way we’re going to build capital right now. What I think is incredible is to me, the innovation at a Fannie Mae happens at the intersection of mission and safety and soundness and profitability, and it’s that tension where we probably do the best work. And, you know, I’m a believer, again, at Fannie Mae, it’s a lot easier because it’s what we do. That our workforce needs to look like the future homeowners. I mean, if I look at who the future homeowners are in this country, there’s a study out there that says by 2040, 90% of homeowners will be people of color. Well, our workforce should look like that, who we partner with, the suppliers we work with. So it’s very much of who we are to us is just how we run our business. To do it well, we have to understand our future homeowner, and that’s what we’re doing.
Murray: Mission and performance.
Almodovar: Mission and performance go hand in hand. You know, serving, I mean, this is true of I think many companies is, you have many stakeholders. You have shareholders for sure. But you’re a citizen of the communities where you work, you’re a citizen to your employees. So I think companies, well-run companies, and I think today most companies, I think, would say they really have to look at the full picture. And by the way, shareholders also expect that—they want good corporate citizens.
Murray: Most of them.
Almodovar: Yes.
Murray: Your shareholders, maybe.
Almodovar: Yes. Yes. No, I think it’s true of you know, I think, look, return is important. And by the way, there’s nothing wrong with that either. Right? So, you know, we are a capitalist society. And I think you can do good and make money at the same time, and the two do not have to be inconsistent.
Lev-Ram: So on that note, I wanted to also bring up the fact we recently had the State of the Union address and housing came up, right? This is a big focus. And while we’ve got plenty of bright spots in the economy, the housing market consistently has been really tough for a lot of people. Again, first time buyers and current homeowners as well because of mortgage rates. As you look out to 2024 and given certain new incentives now that are coming into the fray, like what do you see happening? I mean, is there going to be an easing up here and if so, when? And just what can you tell us about looking out into the future?
Almodovar: Yeah, look, our economists would say that 2024, the economy is still growing at a slower rate. You know, inflation in is coming down. The labor market is still strong. Even the news today, I mean, jobs and there’s still noise in the data, but still strong. We do think that mortgage rates will come down more, settle more in the sixes, low sixes, maybe high fives by 2025. So we do see mortgage rates coming down. So home sales, we expect this year home sales will go up. Last year, home sales were the lowest they’ve been in 30 years. So there’s some good news in the housing market we’re seeing. I mentioned the sentiment that sellers are saying, hmm, maybe this is a good time to sell. We’re seeing new home construction. So we as a country have not built housing at the rate that of new household formation. So new homes are coming online, new built homes. So supply is coming. That helps hopefully will help prices. We think prices will continue to go up, but not at the same pace. So there is some good news. And more and more, one thing that makes me optimistic is, as I mentioned, I used to run a state housing finance agency, I’m finding more mayors and governors are talking about housing because ultimately there’s an issue of supply. We need more supply of housing, you know, depending on which number you look at. Some people say we need 2 million more units of housing. Some people say we need 7 million. The point is we need a lot more housing and supply is ultimately a local issue. It’s a zoning issue. It’s a regulatory building code issue. And the fact that more folks are talking about that makes me optimistic.
Murray: How is AI going to change Fannie Mae?
Almodovar: Yeah, look, so so Fannie Mae has been using artificial intelligence and machine learning for a long time. Like we were the first ones to come up with a loan origination system that’s machine learning, that looks at how it would give an answer. So we’re looking at it very closely. So it’s helping us in our underwriting. So I mentioned rent as being, that’s that’s AI that’s doing that. What’s really exciting to me today is the consumer is changing and the economy. So think of the gig economy. So can we use machine learning and AI to look at bank statements differently to allow non-salary W2 income to count? Right. That would be one example. We’re using AI to understand our climate risk better. Right. Can we, from an informational perspective? Data understanding climate risk is another area. Collateral quality appraisal biases. So we’re using AI to help us look at appraisals differently. How appraisers judge a home and take out biases there. So there are many uses. We are very committed to taking a slower path and doing, you know, we have a governance model, an ethical framework to make sure that we’re doing it transparently. If we use a model that we could explain how it made decisions. We look at privacy and equity. We’re very excited about it.
And obviously one that doesn’t get a lot of hype, but I’m excited about is how we run the company. Think about fraud detection. You know, how do I know when I get a W-2, it’s not a fraudulent W-2. So a big part of AI for a financial institution like a Fannie Mae is fraud detection. Think of cyber. Think of all the anomalies. So looking at anomalies from a fraud perspective, from a cyber perspective. So there are many use cases. And that’s what we’re exploring now because there’s a lot of opportunities. So I’m very excited. One of the books I just read was The Worlds I See by Dr. Fei-Fei Lee.
Murray: Oh cool.
Almodovar: It’s very well done. And it’s good for all of us to understand, like, what is AI? What’s machine learning and how do we bring—her big takeaway is how do we bring a human-centered approach to all this work? So really, it’s a book I recommend, and I know it had an impact on me.
Murray: Fascinating conversation. Priscilla, thank you so much for taking the time to be with us. I hope we’ll see you at Fortune‘s Most Powerful Women event in California. You belong there.
Almodovar: Looking forward to it. Yeah. Thank you.
Lev-Ram: Thank you. Thank you, Priscilla.
Almodovar: Nice to see you.
Orders: Reporting by Regulated Entities of Stress Testing Results
as of December 31, 2023; Summary Instructions and Guidance
Number:2024-N-4
Group: Fannie Mae ; Freddie Mac
Document Number:2024-05757
https://www.govinfo.gov/content/pkg/FR-2024-03-20/pdf/2024-05757.pdf
CFR:12 CFR 1238
Federal Register Publish Date:3/20/2024 Federal Register Citation: 89 FR 19731 PDF Format
Contact Information:
?FOR FURTHER INFORMATION CONTACT: Andrew Varrieur, Senior Associate Director, Office of Capital Policy, (202) 649-3141, Andrew.Varrieur@fha.gov; Karen Heidel, Assistant General Counsel, Office of General Counsel, (202) 738-7753, Karen.Heidel@fhfa.gov. For TTY/TRS users with hearing and speech disabilities, dial 711 and ask to be connected to any of the contact numbers above.
$Booooom ! .... $Ride 'em again $Tomorrow
COMMIES IN CONGRESS #1@FHFA @USTreasury
— Guido da Costa Pereira (@GuidoPerei) March 19, 2024
H.R. 1694 passed 425-0 in the House, but never got a vote in the Senate. Is it because the commies don't want the public to know about about the $301 billion looting of Fannie Mae & Freddie Mac equity?https://t.co/gyjaC5bxR1
DeMarco Critical of FHFA’s Handling of Title Pilot
bivey@imfpubs.com
Edward DeMarco, president of the Housing Policy Council, called on the FHFA to accept
public comments before moving forward with a planned pilot that will waive title insurance
requirements on certain mortgages delivered to the government-sponsored enterprises.
He also raised numerous concerns about the pilot.
“We could discuss our concerns that the GSEs are neither chartered as insurance companies
nor required to hold reserves for the resulting exposure as regulated insurance companies
must do,” DeMarco wrote in a letter to FHFA. “We could note that using third parties to
circumvent this insurance feature creates uncertain financial risks for lenders and for
Treasury Department’s ongoing financial support of the GSEs.”
The Housing Policy Council represents large mortgage companies, insurers and data/settlement
service providers. DeMarco is a former acting director of FHFA.
Freddie Mac and ICE Collaborate to Help Lenders Improve Loan Quality
March 19, 2024 10:30 ET - | Source: Freddie Mac
LAS VEGAS, March 19, 2024 (GLOBE NEWSWIRE) -- Freddie Mac (OTCQB: FMCC) and Intercontinental Exchange, Inc. (NYSE:ICE), a leading global provider of technology and data, today announced they’re working together to bring greater loan quality to the mortgage origination process so lenders can effectively serve more borrowers while reducing risk. The collaboration will leverage both companies’ automation technologies and solutions to help lenders quickly and efficiently underwrite mortgage loans starting at the point of sale.
“We’re joining forces with ICE to combine our organizations’ unique strengths to help more lenders deliver higher quality mortgages in this challenging market,” said Kevin Kauffman, Freddie Mac Single-Family Senior Vice President of Seller Engagement. “Our collaboration with ICE builds upon Freddie Mac’s commitment to improve loan quality from origination through delivery so we can help reduce defects, lower costs and bring greater efficiency to the mortgage origination process.”
The announcement was made during the ICE Experience 2024 conference, an annual event that gathers together thousands of leaders in the real estate and housing finance industries to showcase the latest technologies driving the digital mortgage market forward, from ICE as well as other industry participants.
“ICE is on a mission to make the path to homeownership as fast, transparent, accessible, and simple as possible,” said Tim Bowler, President of ICE’s mortgage technology division. “Our innovations are targeting core issues associated with the cost and turn times of mortgage origination. We’re proud to collaborate with Freddie Mac on the critical matter of improving loan quality to streamline the housing finance market and help minimize related repurchases.”
Over the last two years, Freddie Mac has announced automated capabilities that allow lenders to use asset and employment data to verify a borrower's assets, income and employment, as well as consider cash flow and rent payment history in the risk assessment.
Kauffman added, “As more lenders consider adopting digital tools to mitigate risk and drive improvement in overall loan quality and portfolio performance, this effort signifies the next level of industry collaboration.”
Recent analysis shows that loans originated by lenders leveraging certain Freddie Mac automated offerings are up to four times less likely to produce defects than loans without these technology offerings. Process automation is especially beneficial for documenting income, both in the collection and assessment process. That’s vitally important because income verification issues account for nearly one-third of all purchase transaction defects.
About Freddie Mac
Freddie Mac’s mission is to make home possible for families across the nation. We promote liquidity, stability, affordability and equity in the housing market throughout all economic cycles. Since 1970, we have helped tens of millions of families buy, rent or keep their home. Learn More: Website | Consumers | Twitter | LinkedIn | Facebook | Instagram | YouTube
About Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE: ICE) is a Fortune 500 company that designs, builds, and operates digital networks that connect people to opportunity. We provide financial technology and data services across major asset classes helping our customers access mission-critical workflow tools that increase transparency and efficiency. ICE’s futures, equity, and options exchanges -- including the New York Stock Exchange -- and clearing houses help people invest, raise capital and manage risk. We offer some of the world’s largest markets to trade and clear energy and environmental products. Our fixed income, data services and execution capabilities provide information, analytics and platforms that help our customers streamline processes and capitalize on opportunities. At ICE Mortgage Technology, we are transforming U.S. housing finance, from initial consumer engagement through loan production, closing, registration and the long-term servicing relationship. Together, ICE transforms, streamlines, and automates industries to connect our customers to opportunity.
Trademarks of ICE and/or its affiliates include Intercontinental Exchange, ICE, ICE block design, NYSE and New York Stock Exchange. Information regarding additional trademarks and intellectual property rights of Intercontinental Exchange, Inc. and/or its affiliates is located here. Key Information Documents for certain products covered by the EU Packaged Retail and Insurance-based Investment Products Regulation can be accessed on the relevant exchange website under the heading “Key Information Documents (KIDS).”
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 -- Statements in this press release regarding ICE's business that are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of additional risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see ICE's Securities and Exchange Commission (SEC) filings, including, but not limited to, the risk factors in ICE's Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 8, 2024.
MEDIA CONTACT: Chad Wandler
703-903-2446
Chad_Wandler@FreddieMac.com
ICE MEDIA CONTACT: Mitch Cohen
704-890-8158
Mitch.Cohen@bkfs.com
$Housing getting some POTUS attention $TODAY in $Nevada ! ....
Today in Nevada @POTUS will discuss his plan to build 2 million homes, support renters, & unlock the for-sale market.
— Daniel Hornung (@DanielHornung46) March 19, 2024
He'll also note that the realtor settlement was a key step forward & encourage fee structures that promote choice, lower costs, & protect first-time homebuyers. pic.twitter.com/zcbbfdUVxL
$Housing getting some POTUS attention $TODAY in $Nevada ! ....
Today in Nevada @POTUS will discuss his plan to build 2 million homes, support renters, & unlock the for-sale market.
— Daniel Hornung (@DanielHornung46) March 19, 2024
He'll also note that the realtor settlement was a key step forward & encourage fee structures that promote choice, lower costs, & protect first-time homebuyers. pic.twitter.com/zcbbfdUVxL
$Federal $National $Mortgage $Association: $The $Bulls Are In $Control, $Buy ...... Summary ......
Mar. 18, 2024 11:41 PM ET Federal National Mortgage Association (FNMA) Stock
Pinnacle Investment Analyst - 417 Followers
--- Federal National Mortgage Association stock is up 271%,
outperforming the S&P 500 by 239%.
--- Technical analysis suggests the stock has strong upward momentum and price targets
at $3.27 and $4.22.
--- FNMA's unique business model and recent strategic initiatives position it for growth,
making it an attractive investment opportunity.
Investment Thesis
Federal National Mortgage Association (OTCQB:FNMA) is a government-sponsored enterprise that provides financing for mortgages in the US. Its stock is up by about 271% outpacing the S&P 500 by a margin of about 239%.
Price Chart - Seeking Alpha
From a technical standpoint, I am bullish on this stock because it just rebounded on its support level and it has a significant runway before hitting its resistance zones. I believe its upside potential is backed by its unique business model which I believe positions this company strategically for growth. Additionally, the company's recent strategic initiatives such as the new leadership appointment and selling of non-performing loans in my view are growth catalysts. For these reasons, I am optimistic about this stock and as such I recommend it to potential investors.
Technical View: Dissecting The Price Chart
Before advancing to fundamentals, let's study the price chart and see what there is for us as investors. Firstly, I will look at the support and resistance zones. Based on the price chart, this stock bounced strongly on its major support at about $0.4 which had occurred after a breakout below the previous support zone of $1.49. At its current price, the stock appears to be in a strong upward trajectory as indicated by its momentum metrics below.
Momentum - Seeking Alpha
Given this strong momentum, I don't see a potential retest on the support at around $0.4. As a result, I anticipate that this stock is strongly approaching its resistance levels at $3.27 and $4.22, respectively, as shown below. These two support levels are my price targets for this stock.
Support And Resistance Trading View
In order to get a clear direction, let's dive deeper and look at other indicators. To begin with, this stock is trading above its 50-day, 100-day, and 200-day moving averages - an indication that it is bullish in the short, medium, and long-term horizons. To solidify the upward trajectory, a bullish crossover between the 50-day and 100-day MAs occurred in January 2024 meaning that the uptrend is very strong.
MAs - Market Screener
Further, looking at the Bollinger bands, the price is above the middle line and almost breaking above the upper Bollinger band - an indication that this stock is in bullish momentum. Notably, there is a significant divergence between the lower and upper Bollinger bands, which shows how strong the bullish trend is.
Bollinger Bands - Market Screener
In a nutshell, FNMA is currently in a strong upward momentum with clear resistance zones at $3.27 and $4.22 which happen to be my price targets. Given this background, a buy decision is justified.
FNMA Business Model: A Unique Growth Catalyst
This company operates under a unique business model as a government-sponsored enterprise [GSE] in the US. Its model involves expanding the secondary mortgage market by offering security to mortgage loans to mortgage-backed securities [MBS]. This approach aids in providing liquidity, stability, and affordability to the housing and mortgage sector in the US. I believe so because it purchases mortgage loans from lenders consequently freeing up capital for them to issue more housing loans. It is a system that aims at widening home ownership and making affordable housing more accessible.
Given this model, I find this company in a prime position to grow in the future due to several reasons. First, its role in the mortgage financing system positions it to benefit from the overall growth of the housing market. According to Precedence Research, the US real estate and infrastructure market is projected to grow at a CAGR of 3% between 2023 and 2032 - something I believe to catalyze this company's growth.
US Real Estate and Infrastructure Market Growth - Precedence Research
I expect this company to leverage on this overall housing market growth given the projected growth in global asset-backed securities which is expected to grow by a CAGR of 7.8% between 2024 and 2030.
Market Growth Projection - Verified Market Growth
Further, its model allows for innovation which I believe will also serve as a growth catalyst. For instance, On March 1, 2023, the company in its Selling Notice [SEL-2023-02] introduced updated QC requirements. The update entailed enhanced pre-funding and post-closing policies which were aimed at increasing the integrity of the mortgage process and stability of the housing market.
For example, the time frame for the post-closing QC cycles was shortened from 120 days to 90 days. In addition, the company enhanced the reporting requirements by stating that lenders must complete a minimum number of pre-funding reviews monthly and that the total number of loans to be reviewed should be either 10% of the prior month's total closings or 750 loans. With these innovations, it means that with the reduced QC time frame, any issues can be identified and addressed faster - something that will help in maintaining the overall health of the housing financing system. Further, the enhanced reporting requirements will ensure a consistent and adequate number of loans is reviewed - something which will offer a more comprehensive overview of the lenders' portfolio and thus help in promoting a high standard of loan quality.
The other aspect of its business model that I believe will translate into solid growth is its ability to manage economic cycles. The company's business model carries with it to ensure a smooth flow of credit irrespective of the economic condition courtesy of its mortgage purchases ensuring a steady growth in the housing market.
Given this background, I believe the only way to support this business model is through reflecting on its financial performance. With that in mind, FNMA has trailing revenue of $31.9 billion marking a YoY growth rate of 30.19%, and a net income of$17.4 billion, marking a YoY growth rate of 34.71%. Given this solid financial performance, the company has attractive factor grades both for growth and profitability - something I believe vindicates the company's business model.
Factor Grades
Most interestingly, its business model is protected by unique legislation such as the Federal National Mortgage Charter Act, which establishes the company as a key player in the secondary mortgage market. The act ensures that FNMA operates with a degree of financial autonomy.
Strategic Initiatives
Besides its unique business model, FNMA has adopted strategic measures which I find very promising. The first initiative is the sale of non-performing loans. On March 12, 2024, the company announced the outcome of its 23rd non-performing loan sale transaction. The sale which was announced on February 8th, 2024 included the sale of 1,581 deeply delinquent loans totaling $235.8 million in UPB. The winning bidder is VWH Capital Management, LP.
This strategic move is a good decision because it has several benefits among them being the reduced portfolio risk. Through this sale, the company reduces the size of the retained mortgage portfolio therefore decreasing the exposure to loans that are not generating regular payments. The other benefit is compliance with conservatorship goals. This goal entails the reduction of the number of seriously delinquent loans and meeting portfolio reduction targets as stipulated in the Federal Housing Finance Agency goal.
The other strategic initiative is the appointment of Peter Akwaboah as the chief operating officer. I firmly believe this was an excellent move given Peter's experience and expertise. With nearly three decades of experience in the financial services industry, Peter brings with him a lot of experience and expertise. Just to highlight his background, he has a solid focus on technology and operation having served as the COO for Technology and the Head of Innovation at Morgan Stanley. In addition, his ability to leverage opportunities as demonstrated by his involvement in a $3 billion bond sale for the government of Ghana when he was at Morgan Stanley is undisputable. Most interestingly, his diverse background ranging from roles at Deutsche Bank, KPMG and IBM not forgetting his philanthropic work is indicative of a well-rounded leader who can bring holistic leadership to this company.
In summary, Peter's experience in conjunction with his strategic and innovative mindset paints him as a promising leader who can drive this company to greater heights.
Risks
Despite my bullish stance on this stock, it has its inherent risks which investors should be aware of. Firstly, its unique model as a GSE is subject to future government housing finance reforms which translate to some level of uncertainty. In addition, FNMA is subject to market shocks due to the cyclical nature of the real estate market something that can affect its financial performance during recessions.
Conclusion
In conclusion, FNMA is currently on a solid upward trajectory backed by solid fundamentals. I am optimistic that the upward trend will be sustained until the stock hits its resistance levels. For these reasons, I recommend this stock to potential investors.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
$Federal $National $Mortgage $Association: $The $Bulls Are In $Control, $Buy ...... Summary ......
Mar. 18, 2024 11:41 PM ET Federal National Mortgage Association (FNMA) Stock
Pinnacle Investment Analyst - 417 Followers
--- Federal National Mortgage Association stock is up 271%,
outperforming the S&P 500 by 239%.
--- Technical analysis suggests the stock has strong upward momentum and price targets
at $3.27 and $4.22.
--- FNMA's unique business model and recent strategic initiatives position it for growth,
making it an attractive investment opportunity.
Investment Thesis
Federal National Mortgage Association (OTCQB:FNMA) is a government-sponsored enterprise that provides financing for mortgages in the US. Its stock is up by about 271% outpacing the S&P 500 by a margin of about 239%.
Price Chart - Seeking Alpha
From a technical standpoint, I am bullish on this stock because it just rebounded on its support level and it has a significant runway before hitting its resistance zones. I believe its upside potential is backed by its unique business model which I believe positions this company strategically for growth. Additionally, the company's recent strategic initiatives such as the new leadership appointment and selling of non-performing loans in my view are growth catalysts. For these reasons, I am optimistic about this stock and as such I recommend it to potential investors.
Technical View: Dissecting The Price Chart
Before advancing to fundamentals, let's study the price chart and see what there is for us as investors. Firstly, I will look at the support and resistance zones. Based on the price chart, this stock bounced strongly on its major support at about $0.4 which had occurred after a breakout below the previous support zone of $1.49. At its current price, the stock appears to be in a strong upward trajectory as indicated by its momentum metrics below.
Momentum - Seeking Alpha
Given this strong momentum, I don't see a potential retest on the support at around $0.4. As a result, I anticipate that this stock is strongly approaching its resistance levels at $3.27 and $4.22, respectively, as shown below. These two support levels are my price targets for this stock.
Support And Resistance Trading View
In order to get a clear direction, let's dive deeper and look at other indicators. To begin with, this stock is trading above its 50-day, 100-day, and 200-day moving averages - an indication that it is bullish in the short, medium, and long-term horizons. To solidify the upward trajectory, a bullish crossover between the 50-day and 100-day MAs occurred in January 2024 meaning that the uptrend is very strong.
MAs - Market Screener
Further, looking at the Bollinger bands, the price is above the middle line and almost breaking above the upper Bollinger band - an indication that this stock is in bullish momentum. Notably, there is a significant divergence between the lower and upper Bollinger bands, which shows how strong the bullish trend is.
Bollinger Bands - Market Screener
In a nutshell, FNMA is currently in a strong upward momentum with clear resistance zones at $3.27 and $4.22 which happen to be my price targets. Given this background, a buy decision is justified.
FNMA Business Model: A Unique Growth Catalyst
This company operates under a unique business model as a government-sponsored enterprise [GSE] in the US. Its model involves expanding the secondary mortgage market by offering security to mortgage loans to mortgage-backed securities [MBS]. This approach aids in providing liquidity, stability, and affordability to the housing and mortgage sector in the US. I believe so because it purchases mortgage loans from lenders consequently freeing up capital for them to issue more housing loans. It is a system that aims at widening home ownership and making affordable housing more accessible.
Given this model, I find this company in a prime position to grow in the future due to several reasons. First, its role in the mortgage financing system positions it to benefit from the overall growth of the housing market. According to Precedence Research, the US real estate and infrastructure market is projected to grow at a CAGR of 3% between 2023 and 2032 - something I believe to catalyze this company's growth.
US Real Estate and Infrastructure Market Growth - Precedence Research
I expect this company to leverage on this overall housing market growth given the projected growth in global asset-backed securities which is expected to grow by a CAGR of 7.8% between 2024 and 2030.
Market Growth Projection - Verified Market Growth
Further, its model allows for innovation which I believe will also serve as a growth catalyst. For instance, On March 1, 2023, the company in its Selling Notice [SEL-2023-02] introduced updated QC requirements. The update entailed enhanced pre-funding and post-closing policies which were aimed at increasing the integrity of the mortgage process and stability of the housing market.
For example, the time frame for the post-closing QC cycles was shortened from 120 days to 90 days. In addition, the company enhanced the reporting requirements by stating that lenders must complete a minimum number of pre-funding reviews monthly and that the total number of loans to be reviewed should be either 10% of the prior month's total closings or 750 loans. With these innovations, it means that with the reduced QC time frame, any issues can be identified and addressed faster - something that will help in maintaining the overall health of the housing financing system. Further, the enhanced reporting requirements will ensure a consistent and adequate number of loans is reviewed - something which will offer a more comprehensive overview of the lenders' portfolio and thus help in promoting a high standard of loan quality.
The other aspect of its business model that I believe will translate into solid growth is its ability to manage economic cycles. The company's business model carries with it to ensure a smooth flow of credit irrespective of the economic condition courtesy of its mortgage purchases ensuring a steady growth in the housing market.
Given this background, I believe the only way to support this business model is through reflecting on its financial performance. With that in mind, FNMA has trailing revenue of $31.9 billion marking a YoY growth rate of 30.19%, and a net income of$17.4 billion, marking a YoY growth rate of 34.71%. Given this solid financial performance, the company has attractive factor grades both for growth and profitability - something I believe vindicates the company's business model.
Factor Grades
Most interestingly, its business model is protected by unique legislation such as the Federal National Mortgage Charter Act, which establishes the company as a key player in the secondary mortgage market. The act ensures that FNMA operates with a degree of financial autonomy.
Strategic Initiatives
Besides its unique business model, FNMA has adopted strategic measures which I find very promising. The first initiative is the sale of non-performing loans. On March 12, 2024, the company announced the outcome of its 23rd non-performing loan sale transaction. The sale which was announced on February 8th, 2024 included the sale of 1,581 deeply delinquent loans totaling $235.8 million in UPB. The winning bidder is VWH Capital Management, LP.
This strategic move is a good decision because it has several benefits among them being the reduced portfolio risk. Through this sale, the company reduces the size of the retained mortgage portfolio therefore decreasing the exposure to loans that are not generating regular payments. The other benefit is compliance with conservatorship goals. This goal entails the reduction of the number of seriously delinquent loans and meeting portfolio reduction targets as stipulated in the Federal Housing Finance Agency goal.
The other strategic initiative is the appointment of Peter Akwaboah as the chief operating officer. I firmly believe this was an excellent move given Peter's experience and expertise. With nearly three decades of experience in the financial services industry, Peter brings with him a lot of experience and expertise. Just to highlight his background, he has a solid focus on technology and operation having served as the COO for Technology and the Head of Innovation at Morgan Stanley. In addition, his ability to leverage opportunities as demonstrated by his involvement in a $3 billion bond sale for the government of Ghana when he was at Morgan Stanley is undisputable. Most interestingly, his diverse background ranging from roles at Deutsche Bank, KPMG and IBM not forgetting his philanthropic work is indicative of a well-rounded leader who can bring holistic leadership to this company.
In summary, Peter's experience in conjunction with his strategic and innovative mindset paints him as a promising leader who can drive this company to greater heights.
Risks
Despite my bullish stance on this stock, it has its inherent risks which investors should be aware of. Firstly, its unique model as a GSE is subject to future government housing finance reforms which translate to some level of uncertainty. In addition, FNMA is subject to market shocks due to the cyclical nature of the real estate market something that can affect its financial performance during recessions.
Conclusion
In conclusion, FNMA is currently on a solid upward trajectory backed by solid fundamentals. I am optimistic that the upward trend will be sustained until the stock hits its resistance levels. For these reasons, I recommend this stock to potential investors.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
$Federal $National $Mortgage $Association: $The $Bulls Are In $Control, $Buy
Mar. 18, 2024 11:41 PM ET
........ Summary ........
--- Federal National Mortgage Association stock is up 271%, outperforming the S&P 500 by 239%.
--- Technical analysis suggests the stock has strong upward momentum and price targets at $3.27 and $4.22.
--- FNMA's unique business model and recent strategic initiatives position it for growth,
making it an attractive investment opportunity.
Investment Thesis
Federal National Mortgage Association (OTCQB:FNMA) is a government-sponsored enterprise
that provides financing for mortgages in the US. Its stock is up by about 271% outpacing the S&P 500
by a margin of about 239%.
Federal National Mortgage Association: The Bulls Are In Control, Buy - In a nutshell, FNMA is currently in a strong upward momentum with clear resistance zones at $3.27 and $4.22 which is my price targets. https://t.co/9APXY6ha1O
— Cmdr Ron Luhmann (@usnavycmdr) March 19, 2024
from IMF News .....
Steve Mnuchin, the Treasury secretary in the Trump administration, has increased
his profile of late, first investing in the ailing New York Community Bancshares and
then advocating to buy Tik Tok. Some mortgage professionals have suggested to
us Mnuchin wants a job in a new Trump White House (if it happens), possibly taking
another run of Treasury.
And if that happens, the odds of Fannie Mae and Freddie Mac being released from
conservatorship will increase several-fold…
Hedge-Fund Mgr John Paulson Got Trump Elected, & Now He’s Got a Favor to Ask
— Cmdr Ron Luhmann (@usnavycmdr) March 15, 2024
Nothing big, just privatize Fannie Mae & Freddie Mac when you get a chance. https://t.co/tls9Dve834
the 15 yr GSE FAKE NEWS - "what I'm Hearing" wrong prophet continues infinitum
more so called quotes & sources ...
years of predictions never happened ...
Quotes an Sources: The Biden Admin will enact housing finance reform. https://t.co/057P4An8Hm $FNMA #FANNIEGATE
— Fanniegate Hero (@DoNotLose) March 17, 2024
skateboard quoting fake sources and
making more empty predictions ...
Quotes an Sources: The Biden Admin will enact housing finance reform. https://t.co/057P4An8Hm $FNMA #FANNIEGATE
— Fanniegate Hero (@DoNotLose) March 17, 2024
$Booom ! - $Effective March 29, 2024,
https://www.scotsmanguide.com/news/industry-watch-fannie-announces-asset-verification-enhancements-and-more/#:~:text=Fannie%20Mae%20has%20announced%20new,times%20and%20potential%20cost%20savings.
Industry Watch: Fannie announces asset verification enhancements and more
Effective March 29, 2024, Fannie Mae single-family lenders can use a single
12-month asset verification report in the Desktop Underwriter validation service
to identify recurring deposits in the applicant’s digital bank statement data to
automatically validate income and employment, as well as assets, in one step.
The same report also can be used to identify and consider the applicant’s positive
rent payment and cash flow history, which may benefit more qualified borrowers
who have limited or no credit history.
Fannie Mae has announced new capabilities in its automated underwriting system
to further streamline the mortgage origination process for lenders and homebuyers,
enabling improved loan quality control, faster cycle times and potential cost savings.
$Booom ! - $Effective March 29, 2024,
https://www.scotsmanguide.com/news/industry-watch-fannie-announces-asset-verification-enhancements-and-more/#:~:text=Fannie%20Mae%20has%20announced%20new,times%20and%20potential%20cost%20savings.
Industry Watch: Fannie announces asset verification enhancements and more
Effective March 29, 2024, Fannie Mae single-family lenders can use a single
12-month asset verification report in the Desktop Underwriter validation service
to identify recurring deposits in the applicant’s digital bank statement data to
automatically validate income and employment, as well as assets, in one step.
The same report also can be used to identify and consider the applicant’s positive
rent payment and cash flow history, which may benefit more qualified borrowers
who have limited or no credit history.
Fannie Mae has announced new capabilities in its automated underwriting system
to further streamline the mortgage origination process for lenders and homebuyers,
enabling improved loan quality control, faster cycle times and potential cost savings.
yup - when GSE dividends start again they will be .25 - .50 at least
.25 X 572,250 shares = $143,062 / a year if only .25 /share ...
agree the vast majority of Realtors are lazy commission seeking Leeches
I sold my last San Diego Home myself - walked into the escrow office with Buyer
they wrote up the transaction & I paid ALL closing costs - saved $THOUSANDS
The 6% commission on buying or selling a home is gone
after Realtors association agrees to seismic settlement
DAVID GOLDMAN AND ANNA BAHNEY, CNN March 15, 2024 at 6:17 PM
The 6% commission, a standard in home purchase transactions, is no more.
In a sweeping move expected to dramatically reduce the cost of buying and selling a home, the National Association of Realtors announced Friday a settlement with groups of home sellers, agreeing to end landmark antitrust lawsuits by paying $418 million in damages and eliminating rules on commissions.
The NAR, which represents more than 1 million Realtors, also agreed to put in place a set of new rules. One prohibits agents’ compensation from being included on listings placed on local centralized listing portals known as multiple listing services, which critics say led brokers to push more expensive properties on customers. Another ends requirements that brokers subscribe to multiple listing services — many of which are owned by NAR subsidiaries — where homes are given a wide viewing in a local market. Another new rule will require buyers’ brokers to enter into written agreements with their buyers.
The agreement effectively will destroy the current homebuying and selling business model, in which sellers pay both their broker and a buyer’s broker, which critics say have driven housing prices artificially higher.
By some estimates, real estate commissions are expected to fall 25% to 50%, according to TD Cowen Insights. This will open up opportunities for alternative models of selling real estate that already exist but don’t have much market share, including flat-fee and discount brokerages.
Shares of real estate firms Zillow and Compass both fell by more than 13% Friday as investors feared that lower commission rates for agents could lead to less business for real estate platforms.
In a 10-K filing last month, Zillow warned that, “if agent commissions are meaningfully impacted, it could reduce the marketing budgets of real estate partners or reduce the number of real estate partners participating in the industry, which could adversely affect our financial condition and results of operations.”
Shares of real estate brokerage Redfin also fell nearly 5%.
Meanwhile, homebuilder stocks rose on the news: Lennar shares gained 2.4%, PulteGroup shares added 1.1% and Toll Brothers shares added 1.8%.
For the average-priced American home for sale — $417,000 — sellers are paying more than $25,000 in brokerage fees. Those costs are passed on to the buyer, boosting the price of homes in America. That fee could fall by between $6,000 and $12,000, according to TD Cowen Insights’ analysis.
“While the settlement comes at a significant cost, we believe the benefits it will provide to our industry are worth that cost,” said Kevin Sears, president of the NAR, in a statement.
In November, a federal jury in Missouri found the NAR and two brokerages liable for $1.8 billion in damages for conspiring to keep agent commissions artificially high. Because it was an antitrust case, the NAR was potentially on the hook for triple those damages — $5.4 billion.
The NAR had pledged to appeal the case, but other brokerages settled — and, eventually, so did the NAR, on Friday.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers,” said Nykia Wright, interim CEO of NAR, in a statement. “It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals.”
The NAR had required homesellers to include the compensation for agents when placing a listing on a multiple listing service. Although NAR has long said commissions are negotiable and that the structure helped making housing more affordable for buyers, critics have long argued that the fees were expected and homesellers felt they would lose buyers if they didn’t offer them.
Settlement could lead to lower homebuying costs
Homesellers who brought lawsuits against the NAR have argued that in a competitive market, the cost of the buyer’s agent’s commission should be paid by the buyer who received the service, not by the seller. The sellers who brought the lawsuit against the NAR and the brokerages said that buyers should be able to negotiate the fee with their agent, and that the sellers should not be on the hook for paying it.
This settlement, which is subject to a judge’s approval, opens the door to a more competitive housing market. Realtors could now compete on commissions, allowing for prospective buyers to shop around on rates before they commit to buying a home. Brokers could begin to advertise their fees, allowing customers to choose lower-cost agents. The NAR, in its announcement, did not set a suggested fee.
This marks the biggest change to the housing market in a century, said Norm Miller, professor emeritus of real estate at the University of San Diego.
“I’ve been waiting 50 years for this,” Miller said.
Although it’s unclear what the future of the housing market will look like, Miller said he expected homebuying to pick up somewhat as costs fall dramatically for homebuyers.
“There are all kinds of models we might see in the future, and no one knows what they are,” he said, suggesting some brokers may charge, say, a $3,000 fee for selling a home, while others will offer a competitive commission.
The agreement will bring sweeping reforms for millions of Americans, said Benjamin D. Brown, managing partner of Cohen Milstein Sellers & Toll and co-chair of its antitrust practice, who helped craft the settlement.
“For years, anticompetitive rules in the real estate industry have financially harmed millions of Americans,” said Brown.
Individual sellers often feel powerless to negotiate a better deal for themselves, given the risk that offering lower commissions could cause brokers to steer buyers to other properties, said Robert Braun, a partner in Cohen Milstein’s antitrust practice.
“For far too long, home sellers have faced a system recognized by many as blatantly unfair. This class action and settlement provides justice for our clients and will require important changes that help future home sellers,” said Braun.
Although most realtors are included in the settlement, brokerage HomeServices of America continues to fight the case in court, the NAR said.
The NAR said it had fought to get HomeServices of America agents covered by the settlement, but said it was pleased to have more than 1 million of its members on board with the agreement.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Wright in a statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”
Miller said the settlement could lead to a mass exodus of brokers from the industry — potentially half of the 2 million or so agents in America.
Lower fees mean mediocre agents are likely to leave the field, but top brokers will get more business. “The good ones will absolutely do better,” he said.
America’s fees are significantly higher than in foreign countries, Miller noted. In Israel, Singapore and the UK, brokers charge between 1% to 2% for the same thing that agents do in the United States.
Years of trouble for NAR
The NAR has been fighting off US antitrust officials and litigation for years regarding alleged anti-competitive practices. But November’s verdict marked the association’s biggest setback yet — and ultimately led to the downfall of the rules that have long protected its compensation model.
The association also faces scrutiny from the US Department of Justice, and it’s unclear whether this settlement with sellers will impact the government’s scrutiny of the brokerage industry.
The trade group has also undergone severe leadership turmoil over the past year.
In January, the former president of the NAR, Tracy Kasper, stepped down, after she said she received a threat to disclose a past personal, non-financial matter unless she compromised her position at NAR. Sears replaced Kasper earlier this year.
Kasper had just taken over the role in August 2023, after Kenny Parcell, the former president, resigned amid sexual harassment allegations that were first published by the New York Times. NAR employees reportedly said Parcell improperly touched them and sent lewd photos and texts. In the Times article, Parcell denied the accusations.
In November 2023, the chief executive of NAR, Bob Goldberg, also stepped down, and was replaced by Wright. Goldberg stepped down two days after the $1.8 billion judgment against the NAR.
The 6% commission on buying or selling a home is gone
after Realtors association agrees to seismic settlement
DAVID GOLDMAN AND ANNA BAHNEY, CNN March 15, 2024 at 6:17 PM
The 6% commission, a standard in home purchase transactions, is no more.
In a sweeping move expected to dramatically reduce the cost of buying and selling a home, the National Association of Realtors announced Friday a settlement with groups of home sellers, agreeing to end landmark antitrust lawsuits by paying $418 million in damages and eliminating rules on commissions.
The NAR, which represents more than 1 million Realtors, also agreed to put in place a set of new rules. One prohibits agents’ compensation from being included on listings placed on local centralized listing portals known as multiple listing services, which critics say led brokers to push more expensive properties on customers. Another ends requirements that brokers subscribe to multiple listing services — many of which are owned by NAR subsidiaries — where homes are given a wide viewing in a local market. Another new rule will require buyers’ brokers to enter into written agreements with their buyers.
The agreement effectively will destroy the current homebuying and selling business model, in which sellers pay both their broker and a buyer’s broker, which critics say have driven housing prices artificially higher.
By some estimates, real estate commissions are expected to fall 25% to 50%, according to TD Cowen Insights. This will open up opportunities for alternative models of selling real estate that already exist but don’t have much market share, including flat-fee and discount brokerages.
Shares of real estate firms Zillow and Compass both fell by more than 13% Friday as investors feared that lower commission rates for agents could lead to less business for real estate platforms.
In a 10-K filing last month, Zillow warned that, “if agent commissions are meaningfully impacted, it could reduce the marketing budgets of real estate partners or reduce the number of real estate partners participating in the industry, which could adversely affect our financial condition and results of operations.”
Shares of real estate brokerage Redfin also fell nearly 5%.
Meanwhile, homebuilder stocks rose on the news: Lennar shares gained 2.4%, PulteGroup shares added 1.1% and Toll Brothers shares added 1.8%.
For the average-priced American home for sale — $417,000 — sellers are paying more than $25,000 in brokerage fees. Those costs are passed on to the buyer, boosting the price of homes in America. That fee could fall by between $6,000 and $12,000, according to TD Cowen Insights’ analysis.
“While the settlement comes at a significant cost, we believe the benefits it will provide to our industry are worth that cost,” said Kevin Sears, president of the NAR, in a statement.
In November, a federal jury in Missouri found the NAR and two brokerages liable for $1.8 billion in damages for conspiring to keep agent commissions artificially high. Because it was an antitrust case, the NAR was potentially on the hook for triple those damages — $5.4 billion.
The NAR had pledged to appeal the case, but other brokerages settled — and, eventually, so did the NAR, on Friday.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers,” said Nykia Wright, interim CEO of NAR, in a statement. “It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals.”
The NAR had required homesellers to include the compensation for agents when placing a listing on a multiple listing service. Although NAR has long said commissions are negotiable and that the structure helped making housing more affordable for buyers, critics have long argued that the fees were expected and homesellers felt they would lose buyers if they didn’t offer them.
Settlement could lead to lower homebuying costs
Homesellers who brought lawsuits against the NAR have argued that in a competitive market, the cost of the buyer’s agent’s commission should be paid by the buyer who received the service, not by the seller. The sellers who brought the lawsuit against the NAR and the brokerages said that buyers should be able to negotiate the fee with their agent, and that the sellers should not be on the hook for paying it.
This settlement, which is subject to a judge’s approval, opens the door to a more competitive housing market. Realtors could now compete on commissions, allowing for prospective buyers to shop around on rates before they commit to buying a home. Brokers could begin to advertise their fees, allowing customers to choose lower-cost agents. The NAR, in its announcement, did not set a suggested fee.
This marks the biggest change to the housing market in a century, said Norm Miller, professor emeritus of real estate at the University of San Diego.
“I’ve been waiting 50 years for this,” Miller said.
Although it’s unclear what the future of the housing market will look like, Miller said he expected homebuying to pick up somewhat as costs fall dramatically for homebuyers.
“There are all kinds of models we might see in the future, and no one knows what they are,” he said, suggesting some brokers may charge, say, a $3,000 fee for selling a home, while others will offer a competitive commission.
The agreement will bring sweeping reforms for millions of Americans, said Benjamin D. Brown, managing partner of Cohen Milstein Sellers & Toll and co-chair of its antitrust practice, who helped craft the settlement.
“For years, anticompetitive rules in the real estate industry have financially harmed millions of Americans,” said Brown.
Individual sellers often feel powerless to negotiate a better deal for themselves, given the risk that offering lower commissions could cause brokers to steer buyers to other properties, said Robert Braun, a partner in Cohen Milstein’s antitrust practice.
“For far too long, home sellers have faced a system recognized by many as blatantly unfair. This class action and settlement provides justice for our clients and will require important changes that help future home sellers,” said Braun.
Although most realtors are included in the settlement, brokerage HomeServices of America continues to fight the case in court, the NAR said.
The NAR said it had fought to get HomeServices of America agents covered by the settlement, but said it was pleased to have more than 1 million of its members on board with the agreement.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Wright in a statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”
Miller said the settlement could lead to a mass exodus of brokers from the industry — potentially half of the 2 million or so agents in America.
Lower fees mean mediocre agents are likely to leave the field, but top brokers will get more business. “The good ones will absolutely do better,” he said.
America’s fees are significantly higher than in foreign countries, Miller noted. In Israel, Singapore and the UK, brokers charge between 1% to 2% for the same thing that agents do in the United States.
Years of trouble for NAR
The NAR has been fighting off US antitrust officials and litigation for years regarding alleged anti-competitive practices. But November’s verdict marked the association’s biggest setback yet — and ultimately led to the downfall of the rules that have long protected its compensation model.
The association also faces scrutiny from the US Department of Justice, and it’s unclear whether this settlement with sellers will impact the government’s scrutiny of the brokerage industry.
The trade group has also undergone severe leadership turmoil over the past year.
In January, the former president of the NAR, Tracy Kasper, stepped down, after she said she received a threat to disclose a past personal, non-financial matter unless she compromised her position at NAR. Sears replaced Kasper earlier this year.
Kasper had just taken over the role in August 2023, after Kenny Parcell, the former president, resigned amid sexual harassment allegations that were first published by the New York Times. NAR employees reportedly said Parcell improperly touched them and sent lewd photos and texts. In the Times article, Parcell denied the accusations.
In November 2023, the chief executive of NAR, Bob Goldberg, also stepped down, and was replaced by Wright. Goldberg stepped down two days after the $1.8 billion judgment against the NAR.