Fannie Mae Generates Billions Amid Market Risks
The Federal National Mortgage Association, known as Fannie Mae, reported $4 billion of net income in the second quarter of 2026, marking its 34th consecutive quarterly profit and increasing its net worth to $116.5 billion.
As of 2025, Fannie Mae held over $4.3 trillion in assets, making it the largest company in the United States and the fifth largest in the world by that metric.
How the Secondary Mortgage Market Works
Fannie Mae expands the secondary mortgage market by securitizing mortgage loans into mortgage-backed securities, which allows lenders to reinvest their assets into additional lending.
The company was established by the U.S. Congress in 1938 during the Great Depression as part of Franklin Delano Roosevelt’s New Deal to address widespread mortgage defaults and foreclosures.
For the first thirty years following its inception, Fannie Mae held a monopoly over the secondary mortgage market.
Recent Financial Performance and Market Activity
Fannie Mae returned to profitability in 2012 after losing billions during the financial crisis and receiving government support.
The company provided $125 billion of liquidity to the mortgage market in the second quarter of 2026 by purchasing and refinancing loans backed by single-family homes and multifamily rental properties.
Fannie Mae suspended its quarterly dividends to investors in 2008 when placed under FHFA conservatorship.
Key Risks and Valuation Debates
Prominent investor Michael Burry publicly flagged potential heavy dilution for common shareholders while rotating exposure into junior preferred shares.
Federal National Mortgage Association trades at $3.47, with recent 30-day returns down 39.5% and year-to-date returns down 68.5%.
The company’s large $4.1 trillion guaranty book and role as the largest guarantor of U.S. residential mortgage debt position it to benefit from sustained housing finance demand.
Ongoing repricing of the guaranty book, with higher average guaranty fees in single family, supports the potential for a firmer net interest margin and can be a tailwind for net revenues.
Unresolved conservatorship timelines and rising multifamily credit stress remain significant risks that could reshape returns.
Fannie Mae’s Role in Multifamily Housing and Affordable Housing Initiatives
Beyond its core function in the secondary mortgage market, Fannie Mae plays a significant role in supporting multifamily housing and affordable housing initiatives. As of the second quarter of 2026, the company provided $125 billion in liquidity to the mortgage market, including substantial support for multifamily rental properties. This aligns with Fannie Mae’s mission to increase the availability of affordable housing, a goal that traces back to its founding during the New Deal era.
Fannie Mae’s multifamily business focuses on financing apartment buildings, which helps maintain and expand the supply of rental housing across the United States. By purchasing and securitizing multifamily loans, the company enables lenders to offer more competitive financing terms, ultimately benefiting both property owners and tenants. Additionally, Fannie Mae collaborates with government agencies and nonprofit organizations to develop programs that address housing affordability challenges, such as providing financing for low-income housing tax credit properties.
The company’s commitment to affordable housing is further evidenced by its retention of earnings not paid to the U.S. government as preferred dividends. These retained earnings are reinvested into the mortgage market, enhancing liquidity and supporting the construction and preservation of affordable housing units. This dual focus on multifamily and affordable housing underscores Fannie Mae’s broader impact on the U.S. housing ecosystem, beyond its role as a guarantor of residential mortgage debt.
Historical Context: From the Great Depression to the 2008 Financial Crisis
Fannie Mae’s origins trace back to the Great Depression, a period marked by widespread mortgage defaults and foreclosures. By 1933, an estimated 20 to 25% of the nation’s outstanding mortgage debt was in default, leading to the loss of nearly 25% of American homes to banks. In response, Fannie Mae was established in 1938 as part of Franklin Delano Roosevelt’s New Deal to provide federal funds to local banks for home loans, thereby increasing homeownership and affordable housing availability. The organization initially focused on purchasing Federal Housing Administration (FHA) insured mortgages, creating a liquid secondary mortgage market that allowed banks to issue more loans.
For the first three decades, Fannie Mae held a monopoly over the secondary mortgage market. In 1954, it became a mixed-ownership corporation, with the federal government holding preferred stock and private investors holding common stock. This structure persisted until 1968, when Fannie Mae was converted into a publicly traded company. However, the 2008 financial crisis severely impacted Fannie Mae, as it lost billions on its investment portfolios and mortgage-backed securities guarantees. This led to government intervention, with Fannie Mae placed under the conservatorship of the Federal Housing Finance Agency (FHFA) in 2008, suspending dividends to investors and receiving financial support to stabilize its operations.
Conservatorship and Government Support Dynamics
Fannie Mae has remained under the conservatorship of the Federal Housing Finance Agency (FHFA) since 2008, a status that has shaped its financial structure and investor relations. During this period, the company suspended quarterly dividends to private investors, a measure initiated when the government intervened to stabilize its operations following the financial crisis. Despite the suspension of common stock dividends, Fannie Mae continues to make preferred dividend payments to the U.S. government, which holds a senior preferred stock position in the company.
Earnings not paid to the government as preferred dividends are retained by Fannie Mae and reinvested into the mortgage market, enhancing liquidity and supporting market stability. This retention of earnings has contributed to the company’s return to profitability, with Fannie Mae reporting $4 billion of net income in the second quarter of 2026 and increasing its net worth to $116.5 billion. The company has repaid all financial support received from the government and has since poured billions of dollars into the U.S. Treasury, reflecting its financial recovery while operating under ongoing conservatorship.
Sources
- Fannie Mae
- Federal National Mortgage Association (FNMA) Is Back In Focus, What Are Investors Watching?
- How to Buy Fannie Mae Stock (FNMA) in 2026 | The Motley Fool
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