The latest quarterly performance report from the Federal Housing and Finance Administration makes it clear that Fannie and Freddie are optimistic about the future of the housing market.
The clearest indicator is on page 3, under the heading “Loan Loss Reserves Continue to Fall”:
Credit exposure continued to improve at the Enterprises throughout the year driven by rising house prices and stronger credit characteristics.
In other words, Fannie and Freddie are setting aside less money as a cushion against a housing downturn.
This is a result of (the report explains) higher prices, fewer defaults, and fewer delinquent loans. Because of these, the two enterprises were able to reduce their reserves by 23 percent — that’s $21.5 billion. The two companies earned a total of $132.7 billion in 2013.