Both Fannie Mae and Freddie Mac (the GSEs) reported strong financial results in the fourth quarter of 2020 and significant growth in their net worth which, for the first time in their 12 years in conservatorship, they have an unlimited capacity to grow.

Fannie Mae's net and comprehensive income was $4.6 billion in the fourth quarter and $11.8 billion for the entire year. The quarterly net and comprehensive incomes were both about $300 million higher than in Q3, but the full year fell well short of the 2019 total net of $14.2 billion and comprehensive of $14 billion.

Revenues were higher at $6.3 billion for the quarter and $21.9 billion for the year. The net revenues for the two earlier periods were $5.9 billion and $18.5 billion, respectively. The company said the decline in net and comprehensive income for the year despite the higher revenues was due to a significant decline in credit-related income, from income of $3.5 billion in 2019 to a loss of $(232) million in 2020.

The company acquired $1.4 trillion in mortgages during the year, up 135 percent from 2019 and the largest volume in its history. The total represented a $664 billion increase in refinancing. Thirty-eight percent of the company's single-family conventional guaranty book of business at the end of 2020 was originated during that year.

At year end 3.0 percent (524,555) of the loans in that guaranty portfolio was in forbearance, down from 4.1 percent at the end of Q3. However, 12 percent of those forborne loans were still current.

Fannie Mae reported its net worth at the end of 2020 was $25.3 billion, a year-over-year gain of $10.7 billion. Under the terms of its agreement with the U.S. Treasury, when that net reached a $25 billion "buffer" the company had to resume net sweep dividend payments of any excess to Treasury. That agreement was modified last month to allow both GSEs to begin building capital which would allow them to fund their exit from conservatorship.

Freddie Mac reported net income for the fourth quarter of $2.9 billion and $7.3 billion for the entire year. Comprehensive income for the two periods was $2.5 billion and $7.5 billion. The year-end totals were $0.1 billion higher for net income and $0.3 billion lower for comprehensive income than in 2019. Comprehensive income was down because of higher provisions for credit losses.

Interest income for the full year was $900 million higher than a year earlier at $12.7 billion and the quarterly share, at $3.7 billion beat the previous quarter by almost $200 million. The company attributed this to portfolio growth and faster mortgage prepayments due to low interest rates. Guarantee fee income totaled  $1.4 billion compared to $1.1 billion in 2019 and investment gains were almost $1 billion higher.

Freddie Mac said its new business activity increased 141 percent from 2019 to $1.1 trillion, driven by both purchase and refinance activity which grew because of the low interest rate environment. The company funded 3.8 million single-family homes, approximately 27 percent of them through refinancing. The weighted average loan-to-value ratio of new activity improved from 77 percent in 2019 to 71 percent in 2020.

The company's Single-Family guarantee portfolio grew 17 percent to $2.3 trillion. This came through an increase in single-family mortgage debt outstanding and higher new business activity.

The total net worth of Freddie Mac grew to $16.4 billion from $9.1 billion at the end of 2019. As with Fannie Mae, Freddie Mac will no longer have a limit to its net worth after which it must resume dividends to the Treasury but instead those dividends are deferred and increase the value of Treasury's preferred stock holdings. That value increased from $84.1 billion on September 30, 2020 to $86.5 billion at year's end.