Core Insights - Fannie Mae reported its second quarter 2025 financial results and filed its Form 10-Q with the SEC, providing condensed consolidated financial statements for the quarter ended June 30, 2025 [1] Group 1 - The financial results and Form 10-Q are now available on Fannie Mae's website [1] - A webcast is scheduled to discuss the company's results at 8:00 a.m. ET [2] - Participants can join the webcast via a provided link and have the option to listen by phone if they encounter difficulties [2]

Financial Data and Key Metrics Changes - The company experienced a total economic return of negative 14.5% for the second quarter, and negative 1.4% excluding a loss contingency accrual of $1.92 per share [5][16] - The book value decreased to $12.14 per share, reflecting the impact of the loss contingency accrual [16] - A comprehensive loss of $221.8 million or $2.13 per share was reported, which would have been $21.9 million or 21¢ per share without the accrual [16] Business Line Data and Key Metrics Changes - First lien originations increased to $48 million UPB in Q2, up 68% from $29 million UPB in Q1, outpacing the nationwide trend of 16% [8] - Second liens brokered amounted to $44 million UPB, with the company beginning to originate second liens in its own name [9] Market Data and Key Metrics Changes - The 30-year fixed mortgage rate rose from 6.6% to a high near 6.9%, stabilizing in the 6.7% to 6.8% range by the end of the quarter [6][7] - The volume of MSR available in the bulk market has decreased by about 30% year over year [26] Company Strategy and Development Direction - The company is enhancing its direct-to-consumer originations platform to recapture loans in its portfolio that may refinance [8] - Significant investments in AI technologies are being made to improve efficiencies and customer experiences [11][12] - The core strategy focuses on low coupon MSR paired with agency RMBS to benefit from stable prepayments and wide agency spreads [31] Management's Comments on Operating Environment and Future Outlook - The management noted ongoing tariff threats and geopolitical tensions as potential market weighers, but also highlighted opportunities in the current environment [30] - The company expects RMBS and MSR portfolios to respond positively if the Federal Reserve cuts rates later in the year [7] Other Important Information - The company issued $115 million in senior notes due in 2030 for net proceeds of $110.8 million, part of which will be used for refinancing [19] - The economic debt to equity ratio increased to 7x, which is within the historical leverage range of 5 to 8 [20] Q&A Session Summary Question: Is the current leverage level a new standard? - Management confirmed that the leverage of 7x is within the historical range and reflects current market conditions [34][35] Question: Update on economic return performance in July? - The company reported an economic return of about 1.5% for July [36] Question: Differences between expected returns and EAD metric? - Management explained that EAD is based on historical purchase yields, while expected returns reflect forward-looking market conditions [43] Question: Thoughts on financing strategy and shift from repo to unsecured? - The issuance of a baby bond was primarily to prefinance the maturity of existing convertible debt [63] Question: Impact of steepening yield curve on the portfolio? - Management indicated that a steepening yield curve could have counterbalancing effects on MSR values, affecting both float income and prepayment assumptions [70] Question: Plans for second liens in the investment portfolio? - The company is open to retaining second liens if yields are attractive, but will also consider selling them [55] Question: Expense structure and AI investment impact? - Most AI-related expenses will be recognized as operational expenses rather than capitalized, affecting the expense ratio [88][92]

Group 1 - Fannie Mae plans to report its second quarter 2025 financial results on July 30, 2025, before the U.S. financial markets open [1] - A webcast to discuss the financial results is scheduled for 8:00 a.m. ET on the same day [1] - Prior to the webcast, various financial documents including the earnings news release and quarterly report will be available on the company's website [2] Group 2 - The webcast can be accessed via a provided link, and participants can also listen by phone if they encounter difficulties [3] - A transcript of the webcast will be published on the company's financial results webpage after the event [2]

Financial Data and Key Metrics Changes - The book value per share decreased by 3% from the prior quarter to $18.45, while earnings available for distribution per share increased by $0.01 to $0.73, exceeding the dividend for the quarter [20][21] - The economic return for Q2 was 0.7%, marking the seventh consecutive quarter of positive economic returns, with a year-to-date economic return of 3.7% and total shareholder return exceeding 10% [9][20] - The investment portfolio yield increased to 5.41% from 5.23% in the prior quarter, while average repo rates decreased to 4.53% [21][22] Business Line Data and Key Metrics Changes - The Agency portfolio's market value rose to nearly $80 billion, a 6% increase quarter-over-quarter, with a $4.5 billion growth in notional terms [10][11] - The residential credit portfolio remained stable at $6.6 billion in market value, with Onslow Bay achieving record securitization activity of $3.6 billion across seven transactions [13][14] - The Mortgage Servicing Rights (MSR) portfolio ended the quarter unchanged at $3.3 billion, with solid performance metrics including a three-month CPR of 4.6% and serious delinquencies unchanged at 50 basis points [17][18] Market Data and Key Metrics Changes - The U.S. economy is projected to grow at around 1% annualized for the first half of the year, with an unemployment rate of 4.1% [6][8] - Inflation is expected to run at the slowest level in the past three quarters, with the Fed anticipated to deliver two interest rate cuts in 2025 [7][8] - Agency MBS spreads widened by 5 to 10 basis points during the quarter, despite improvements in market sentiment [9][10] Company Strategy and Development Direction - The company aims to maintain a strong focus on the agency sector while strategically growing its residential credit and MSR portfolios [18] - The management is optimistic about the agency sector fundamentals and potential catalysts for improvement, including GSE reform [12][18] - The company has diversified its funding sources significantly, enhancing liquidity and operational flexibility [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to cover and potentially out-earn the dividend for the remainder of the year, citing a conducive environment for achieving close to the dividend yield [28][29] - The company is well-positioned to navigate macroeconomic uncertainties, with a focus on managing rate risk and maintaining low leverage [34][40] - The outlook remains positive, with expectations for continued strong risk-adjusted returns in the current environment [18][19] Other Important Information - The company raised over $750 million of accretive capital in Q2, predominantly deployed in the agency sector, leading to a modest increase in leverage to 5.8 turns [9][10] - The MSR portfolio's valuation improved modestly due to a steepening yield curve and lower implied volatility [17][18] Q&A Session Summary Question: Update on book value quarter to date - The pre-dividend accrual book was up about 0.5%, indicating a 1.5% economic return [27] Question: Comfort level with the dividend - Management expressed confidence in covering the dividend, with expectations to out-earn it for the remainder of the year [28] Question: Managing the portfolio through volatility - The company maintained a good liquidity position and managed exposure carefully, allowing leverage to drift higher while focusing on rate risk [33][34] Question: Expectations for GSE reform - Management expects GSE reform to be prioritized, which could create opportunities for the company in the origination space [56] Question: Demand for Agency MBS - Demand from fixed income funds has been strong, with expectations for MBS spreads to tighten even without additional demand from banks [75][76] Question: Outlook for residential credit issuance - The company anticipates robust issuance in the second half of the year, tracking to be the highest since 2021 [81] Question: Impact of tariffs on inflation - Management acknowledged that inflation will pass through due to tariffs, but they remain optimistic about achieving the expected Fed cuts [92][96]

Financial Performance - PennyMac Mortgage Investment Trust (PMT) reported a net loss attributable to common shareholders of $3 million, resulting in a diluted EPS of $(004)[5] - The company declared a dividend per common share of $040[5] - Return on average common equity was (1)%[5] - Book value per share was $1500[5] Investment Strategies & Results - Credit sensitive strategies generated a pretax loss of $5 million, but pretax income excluding market driven value changes was $24 million[5] - Interest rate sensitive strategies generated a pretax income of $14 million, but pretax income excluding market driven value changes was $31 billion[5] - Correspondent production generated a pretax income of $22 million[5] - New investments in MSR totaled $44 million, with a fair value of MSR investments at $37 billion[5] - Net new investments in senior bonds from PMT securitizations were $66 million[5] - Net new investments in credit sub-bonds from PMT securitizations were $87 million, with a fair value of organically-created CRT investments at $10 billion[5]

Financial Data and Key Metrics Changes - AGNC reported a comprehensive loss of $0.13 per common share for Q2 2025, with an economic return on tangible common equity of negative 1% [17] - The tangible net book value per share declined by $0.44, while dividends declared per common share were $0.36 [17] - Quarter-end leverage increased slightly to 7.6x tangible equity from 7.5x in Q1, with average leverage rising to 7.5x from 7.3x [17][18] Business Line Data and Key Metrics Changes - Net spread and dollar roll income decreased to $0.38 per common share, primarily due to the timing of capital deployment and higher swap costs [19] - The average projected life CPR of the portfolio declined to 7.8% from 8.3% in Q1, while actual CPRs averaged 8.7% for the quarter, up from 7% in the prior quarter [20] Market Data and Key Metrics Changes - Agency mortgage-backed securities (MBS) spreads widened, with the current coupon spread to treasury and swap benchmarks ending the quarter wider by 7 and 14 basis points respectively [10] - The net supply of new MBS is expected to be about $200 billion this year, at the low end of most forecasts [11] Company Strategy and Development Direction - The company maintains a positive outlook for agency MBS, driven by manageable supply, anticipated regulatory changes, and stabilizing spreads [24] - AGNC is focused on maintaining sufficient liquidity to navigate financial market volatility and is opportunistically deploying capital raised during the quarter [9][18] Management's Comments on Operating Environment and Future Outlook - Management noted that the financial market stress in April led to a negative investor sentiment, but markets recovered towards the end of the quarter [6][9] - The company expects banks and foreign demand for agency MBS to grow, with seasonal supply patterns for MBS issuance improving as they enter Q3 [10] Other Important Information - The company raised just under $800 million of common equity through its At the Market Offering Program at a significant premium to tangible net book value [18] - The weighted average coupon of the asset portfolio increased to 5.13% during the quarter, with 81% of assets having positive prepayment attributes [22] Q&A Session Summary Question: Insights on the attractive environment for agency MBS - Management indicated a favorable outlook for agency MBS, with the potential for raising additional capital or increasing leverage depending on market conditions [27][30] Question: Core earnings trajectory and dividend levels - Management discussed the alignment of net spread and dollar roll income with portfolio economics, estimating returns in the high teens [37][40] Question: Capital deployment progress and coupon preferences - Management confirmed that about $1 billion worth of mortgages were purchased recently, favoring higher coupon specified pools with favorable prepayment characteristics [48][49] Question: Optimal size of the company and market capacity constraints - Management emphasized growth is not for its own sake but to benefit existing shareholders, while being mindful of market capacity constraints [55][59] Question: Balance between swap hedges and treasury futures - Management indicated a preference for a balanced mix of swaps and treasuries, with a current overweight in swaps due to expected stability in swap spreads [64][66] Question: Impact of changes in credit scoring on prepayment environment - Management acknowledged that changes in credit scoring could lead to higher prepayments but deemed the impact not significant from an investor perspective [106][109] Question: Risks associated with lower rates and rapid repayments - Management recognized the risk of a more efficient market leading to quicker prepayments but noted that significant rate drops would be necessary for widespread refinancing [112][115]

Financial Data and Key Metrics Changes - The company's market capitalization as of June 30 is over $1,500,000,000, representing nearly 50% growth since June 2024 [8] - Net interest income continues to trend upwards as new investments with attractive yields are added to the portfolio [10] - The portfolio has grown to $14,000,000,000, which is 25% larger since the end of the first quarter and over 50% larger than the same time last year [12] Business Line Data and Key Metrics Changes - The company raised $560,000,000 of new capital this year, allowing it to continue raising capital at a premium to book value [11] - The portfolio's liquidity at quarter end was $891,000,000, or 55% of total equity, indicating a strong liquidity position [12] Market Data and Key Metrics Changes - Agency mortgage-backed securities (MBS) continue to offer attractive returns, with ROEs on newly acquired positions ranging from the mid-teens to low 20% [19] - Mortgages remain extremely cheap relative to corporate bonds, with a mixed technical picture in the medium term affecting spread tightening [20] Company Strategy and Development Direction - The company is focused on raising capital, deploying it into historically cheap investments, and managing its portfolio carefully through volatile periods [7] - A strategic increase in leverage from 7.4% to 8.3% was executed as the policy environment became more supportive [17] - The company is building a world-class operating platform by bringing several functions in-house to achieve scale and retain institutional knowledge [13] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of a proactive approach to navigating market volatility and uncertainty [16] - The current environment is viewed as highly favorable for long-term capital deployment, with wide agency MBS spreads allowing for historic returns [23] - Management expressed confidence in the company's positioning to capitalize on market dynamics and generate strong risk-adjusted returns [23] Other Important Information - The company has appointed Michael Angelo as the chief legal officer and corporate secretary, bringing relevant experience from various financial institutions [5] Q&A Session Summary Question: Can you talk about the leverage range you're targeting? - Management indicated that leverage has been flexed down when the risk environment does not warrant incremental risk, and they are currently at a level that reflects a return to normal [29][30] Question: What are the conditions that might require other investors to be more active in the mortgage-backed space? - Management noted that banks would likely return when they see actual Fed rate cuts, while money managers have been overweight mortgages relative to corporates [40][41] Question: What are your thoughts on swap spreads and their future? - Management stated that current swap spreads are attractive, providing a large margin of safety, and they expect to continue generating strong returns despite potential fluctuations [46][48] Question: How do you view the coupon allocation between pools versus TBAs? - Management explained that they are working into a larger pool position, which offers more certainty in cash flows and is expected to be as attractive as thirty-year RMBS [62][63] Question: Can you provide an overview of the returns on Agency CMBS relative to RMBS? - Management highlighted that Agency CMBS offers a stable economic return profile and is being considered for its compelling return potential in the current market [60][62]

Core Viewpoint - Fannie Mae is considered a favorable investment opportunity following the passage of President Trump's legislation and a decrease in stock price, with a current rating of Hold [1]. Group 1: Company Analysis - Fannie Mae is analyzed through a value investing lens, focusing on an owner's mindset and a long-term investment horizon [1]. - The company is part of a broader investment strategy that does not include short selling or negative recommendations [1]. Group 2: Analyst's Position - The analyst holds a beneficial long position in Fannie Mae shares, indicating confidence in the company's future performance [2].

Group 1 - Freddie Mac released its Monthly Volume Summary for April 2025, detailing mortgage-related portfolios, securities issuance, risk management, delinquencies, debt activities, and other investments [1] - The company aims to enhance liquidity, stability, and affordability in the housing market across various economic cycles [2] - Since its inception in 1970, Freddie Mac has assisted tens of millions of families in buying, renting, or maintaining their homes [2]

Core Viewpoint - Freddie Mac has announced the pricing of its Seasoned Loans Structured Transaction Trust (SLST) Series 2025-1, which involves a securitization of approximately $284.2 million backed by seasoned residential mortgage loans [1][2]. Group 1: Transaction Details - The transaction comprises approximately $262.9 million in guaranteed senior certificates and approximately $21.3 million in non-guaranteed subordinate certificates, with the subordinate certificates auctioned on May 19, 2025 [2]. - The expected settlement date for the transaction is May 28, 2025 [2]. Group 2: Underlying Collateral - The collateral backing the certificates consists of 1,891 seasoned loans, including fixed, adjustable, and step-rate loans, with none of the loans being more than 150 days delinquent as of the cut-off date [3]. - The loans include both modified loans to assist borrowers at risk of foreclosure and loans that were never modified [3]. - Select Portfolio Servicing, Inc. will service the loans post-closing [3]. Group 3: Advisory and Management - Advisors for this transaction include BofA Securities, Inc. and Wells Fargo Securities, LLC as co-lead managers, along with Citigroup Global Markets Inc., Nomura Securities International, Inc., Academy Securities, Inc., and StoneX Financial Inc. as co-managers [4]. Group 4: Freddie Mac's Strategy - Freddie Mac's seasoned loan offerings aim to reduce less-liquid assets in its mortgage-related investments portfolio through economically sensible transactions, including sales of Non-Performing Loans (NPLs) and securitizations of re-performing loans (RPLs) [5]. - Since 2011, Freddie Mac has sold approximately $10.4 billion of NPLs and securitized about $80.3 billion of RPLs, which includes $30.4 billion of fully guaranteed MBS, $36.9 billion through the Seasoned Credit Risk Transfer (SCRT) program, and $13.0 billion through the SLST program [5].