Fannie Mae is optimistic about its business outlook, both in the near future and for the balance of this decade.
In a presentation to investors last week, Robert J. Levin, executive vice president for marketing, reviewed the external factors that are contributing to this optimism.
Mr. Levin predicted that the primary mortgage market would have a growth rate in the high single digits for the next five years, while the secondary market would have growth in the low double digits.
The expectation is that Fannie Mae, formally the Federal National Mortgage Association, and Freddie Mac, the Federal Home Loan Mortgage Corp., will gradually take market share away from banks and thrifts, which hold the mortgages they originate for investment.
He also said he saw the low growth of the secondary market last year and in the first half of this year as an aberration. An unusual pileup of market advantages gave thrifts and banks a big edge over other market participants, but that edge is rapidly eroding, he said (See table above.)
Investors and securities analysts attending the daylong conference were told that Fannie Mae's portfolio growth would exceed gains in secondary- market share for the balance of the decade.
The company's portfolio has inched up steadily in recent years, moving from 4% of conventional mortgage debt in 1990 to about 7% last year despite a slowdown in the growth rate, according to Thomas A. Lawler, senior vice president for portfolio management.
He noted that the portfolio could have grown faster last year, but not enough opportunities were available with favorable spreads. This left Fannie with a $46.1 billion in liquid investments.
Ann Logan, executive vice president and chief credit officer, said total loan losses at Fannie Mae had declined in recent years, amounting to an annualized rate of just 5.1 basis points in the first quarter, about half of what they were in 1988.
Multifamily credit losses are also showing a sharp decline, with the delinquency rate down to 1.21% last year.